Brent crude (QA) extended its major (long-term) 3-wave downtrend to a low of $91.52 during August. The next downside target is $90.78, the 38.2% retracement level of the previous uptrend from $16.00 (April 2020) through the high of $137.00 (March 2022). Given the market’s forward curve remains inverted, indicating long-term fundamentals remain bullish, the market would be expected to retrace no more than 50% down at $76.50. Monthly stochastics remain well above the oversold level of 20% indicating there is still plenty of time and space for the market to move lower.
WTI crude oil (CL) also extended its major downtrend to a low of $85.73 during August, moving just below the initial downside target of $87.54. This price marks the 38.2% retracement level of the previous uptrend from $18.05 (May 2020, discounting the fall to -$40.32 during April of that year) through the high of $130.50 (March 2022). As with Brent, WTI’s forward curve is inverted meaning long-term fundamentals remain bullish. This should limit the retracement to at most 50%, putting the long-term target at $74.27. If that move occurs, then it should be enough to pull monthly stochastics below the oversold level of 20%, setting the stage for a bullish crossover.
Distillates (HO, heating oil, diesel fuel, jet fuel, etc.) are a difficult read. On one hand, the market posted a bullish key reversal during August culmination with a close of $3.6674, up 11.84 cents for the month. Given long-term market fundamentals remain bullish, and seasonally heating oil should see increased buying interest, we could jump to the conclusion the major trend has turned up. However, on the other hand monthly stocahstics are well above the oversold level of 20% indicating the market has time and space to move lower. If looking to buy based on last month’s bullish pattern, sell stops would be placed below the August low of $3.1424.
RBOB gasoline (RB) extended its major 3-wave downtrend to a low of $2.4130 during August. This was just above its next support level of $2.3510, the 50% retracement level of the previous uptrend from $0.3760 (March 2020) through the high of $4.3260 (June 2020). It’s possible the market could rally off this test of support, a move that would be considered Wave B (second wave) of the 3-wave pattern. Eventually the Wave A low would be expected to give way, with the next downside target at $1.8849.
Natural gas (NG) posted another wild month during August, extending its major (long-term) uptrend to a high of $10.028 before closing at $9.127. I have no interest in trading this market, as usual, as it could still move a long way in either direction. Based on news headlines, the path of least resistance still seems to be up as we move one step closer to winter in Europe and the uncertainty of natural gas supplies for heating.
