Author: Dean Rogers, CMT

Dean Rogers, CMT is the general manager of the Kase Call Center in Albuquerque, New Mexico. He oversees all of Kase and Company, Inc.’s operations including research and development, marketing, and client support. Dean began his career with Kase in early 2001 as a programmer but has developed into Kase’s senior technical analyst. He writes Kase’s award-winning weekly Crude Oil, Natural Gas, and Metals Commentaries. He is an instructor at Kase's classes and webinars and provides all of the necessary training and support for Kase's hedging models and trading indicators for both retail and institutional traders.

By Dean Rogers

Last week, speculation that a possible meeting next month between Russia and OPEC to discuss production cuts fueled WTI’s price rise. This would be the type of transition that needs to take place for oil prices to recover over the course of the long-term. However, many are skeptical, and some reports indicate that this may be nothing more than verbal attempts to keep prices from aggressively sliding lower.

The market’s hesitance to push higher became evident on Thursday when March WTI stalled just above the $34.4 projection of the wave $27.56 – 32.74 – 29.25. The pullback from $34.82 formed a blow-off high and Friday’s evening star setup was confirmed by Monday’s decline. WTI has already retraced nearly 50 percent of the move up, and is poised to continue its decline.

The move down has been confirmed by KaseX sell signals (purple diamonds), and WTI is now sitting just above crucial support at $31.1. This is a highly confluent wave projection and retracement. A close below $31.1 would call for $30.3, and at best, would indicate prices are going to settle into a trading range while the market sorts itself out. Given the magnitude of Monday’s decline, WTI could be hard pressed to hold $31.1 and $30.3.

Trading has been erratic over the past two weeks, and last week prices also pulled back significantly to test support at $29.25 early in the week. There is an outside chance that the move up will continue, but for now, we expect that Monday’s $32.7 midpoint will hold. A close over $32.7 would call for $33.5 and possibly $34.4 again.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

WTI’s rally from $27.56 late last week was sparked by a few positive technical factors such as a daily bullish engulfing line and momentum divergence. These are factors that would normally accompany a major turn. The move up was a bit over exuberant though, and has stalled at $32.74. Major support at $29.6 is already being tested, and it looks like the rally might be short lived.

Technicals will generally lead the way when a turn is taking place. However, markets, especially the energy markets, have a propensity to overcorrect after being so deeply oversold. To sustain the move higher a shift in the underlying fundamentals must take place. Given today’s pullback, it looks like the market is doubtful that will be the case. The move up is not doomed (yet), but major support is being already being challenged.

The rise from $27.56 unfolded as five-waves that stalled at $32.74, the trend terminus (Y^3/X^2) of Wave I. The decline from $32.47 might be a three-wave correction. However, prices are testing major support at $29.6. A close below $29.6 would call for $28.6 and then a retest of the $27.56 low.

Give the confluence of support at $29.6 a test of resistance could take place early tomorrow. First resistance is $31.1. However, WTI will need to close over $31.8 to have a shot at moving higher again later this week.

By Dean Rogers

S&P 500 Index (SPX)

It has been a rough start for investors and the stock market so far this year. Falling oil prices and a weak economic outlook for China have soured the outlook for global markets and have indices across the world testing major support.

The technical outlook for the S&P 500 Index is negative. The index fell below its late August 2015 1867.01 swing low and has challenged major support at 1842 for the past few days. A few weeks ago we call for the S&P to test 1842 because of its confluence as a projection for major waves down from 2134.72 and 2116.48. This extremely important 1842 target was taken out by the 1812.29 swing low, but the index has not settled below 1842 yet.

Daily S&P 500 Index with KaseX

The 1842 target has been adjusted to 1845 based upon the new wave formations and retracements. A sustained close below 1845 could open the way for the decline to continue to at least 1771 and ultimately 1688 as indicated in the table below.

The confluence of 1842 makes it a potential stalling point, and at minimum, a correction will likely take place before the move down continues. Resistance at 1910 should hold, but the key level for the near-term is 1938. A close over 1938 would not mean that the move down is over, but would rather call for an extended upward correction to 1986 and possibly 2056. A close over the latter would be bullish for the long-term outlook.

10-Year T-Note Futures (TY)

As stock prices have fallen some monetary funds have been shifting into fixed income. As a result, 10-Year T-Note futures have risen substantially in recent weeks. The move up is poised to continue, but several negative technical factors indicate a correction should take place first.

An important resistance level at 128’19 was overcome earlier this week. This was the 0.618 projection for the wave 124’19 – 130’00.5 – 124’14. Kase’s wave analysis studies show that once the 0.618 projection is met most waves will extend to at least the 1.00 projection, in this case 130’17. This is near our model’s confluence point of 130’0 and the most recent major swing high. A sustained close over 130’0 would call for 131’20 and very likely 132’16.

The retracements of the move up from 125’14 to 129’08 define crucial support levels in coming weeks. As stated, a correction is expected, and a normal correction should hold 127’25.5. A close below this would call for an extended correction to key support at 126’25.5. If the move up is going to have any chance at continuing in coming weeks 126’25.5 must hold.

Daily Continuation 10-Year T-Note Futures with KaseX

These are brief technical analyses based upon Kase’s technical forecasting models and trading indicators KaseX and Kase StatWare. If you are interested in taking a trial of KaseX or Kase StatWare please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

Natural gas fell back into the trading range between $2.23 and $2.39 where it spent the first week of the new year. This comes after the failure to extend to the 0.618 projection of the wave $1.802 – 2.386 – 2.188. There is still an outside chance the move up will extend to $2.56 while $2.188 holds, but overall, the charts do not look good and odds favor a decline to test major support.

The move down from $2.495 broke down into five waves that terminated near $2.241. Today’s small move up to $2.323 was the type of three-wave correction that would be expected after a five-wave pattern. This keeps short-term odds in favor of the decline below key support at $2.23. Upon a close below $2.23 look for $2.17, the 0.618 projection of the wave $2.495 – 2.241 – 2.323. This then connects to $2.07 as the 1.00 projection. These are also the 50 and 62 percent retracements of the move up from $1.802 to $2.495, respectively.

Today’s Harami line and star setup is positive, but the star’s blow-off high dampens the likelihood of a turn higher tomorrow. A surprise bullish withdrawal reported by the EIA tomorrow morning could push prices higher, but based upon the price action for the past few days it looks as though most market participants expect the decline to continue.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

China’s stock market plunge wreaked havoc on stock and commodity prices around the world last week. Fears of a further slowing economy in the world’s largest energy consumer along with weak manufacturing demand and the deepening global supply glut have recast a negative outlook on oil prices. The negative sentiment has been reflected in the technicals too as prices continue to fall.

February WTI fell to $30.88 on Monday and came close to meeting a crucial confluence point at $30.6. This is near the 0.618 projection of the wave $38.39 – 32.1 – 34.34, and is the last support protecting against a decline into the $20s. A close below $30.6 would call for at least $29.0 and likely $28.1. The latter is the 1.00 projection for the wave down from $38.39.

The KasePO PeakOut (green P) indicates Monday’s $32.2 midpoint might be tested early Tuesday, but we expect this level to hold. Other than the intraday PeakOut there is little to no technical evidence that the decline is going to stall. Therefore, without some type of unexpected shift in the underlying fundamentals and/or technicals we expect to see prices fall into the $20s soon.

S&P 500 Index (SPX)

By Dean Rogers

The slowing Chinese economy, lackluster manufacturing data, and a weaker yuan have sent Chinese stocks tumbling in the first week of 2016. China’s stock market has been halted twice this week when volatility limits were reached and is down seven percent over the last few days. The selloff has spilled over into global markets as the Dow Jones Industrial Average and S&P 500 Index are off to their worst starts for a year ever.

The S&P 500 Index (SPX) charts reflect the near-term negative tone. Several factors indicate the decline should challenge support levels below August’s 1867.01 low at 1842. This will be a crucial decision point for a much more bearish outlook and sustained decline over the next several weeks and possibly months.

The table below shows SPX targets and resistance levels and the associated probabilities for meeting those targets and levels within the next 10 trading days. Kase’s technical forecasting models indicate odds are 80 percent for at least 1900 and 65 percent for 1842. The latter is the bearish decision point and will probably hold, at least initially.

January 7’s close below the 62 percent retracement of the move up from 1867.01 to 2116.48 has shifted odds in favor of a continued decline. In addition, the 0.618 projection of the primary wave 2134.72 – 1867.01 – 2116.48 has been taken out by January 7’s close. Waves that close below the 0.618 projection generally extend to at least the 1.00 projection, in this case 1842 (+/- 7 points). Therefore, the SPX should fall to 1842 before a significant upward correction takes place. A close below 1842 would call for 1744 as the 1.382 projection for the wave down from 2134.72 with an intermediate confluence point at 1788.

SPX Daily with KaseX

First resistance is 2006, the 38 percent retracement of the decline from 2116.48 to 1938.83. This level will most likely hold upon a correction. The key level for the near term is 2048, the 62 percent retracement. A close over 2048 would indicate the move down is most likely over and that the SPX will push towards at least 2093 which connects to 2184. A close over 2048 has 35 percent odds and a close over 2093 has 20 percent odds.

KaseX confirms the move down on the weekly chart. The recent overbought signal (gray arrow) and unfiltered short entries (pink triangles) indicate the decline should continue. On the daily chart, for those that are not already short, KaseX shows that it would be prudent to wait for a pullback and another confirmed sell signal (pink or purple triangle) after the recent short warning (yellow triangle).

SPX Weekly with KaseX

With all factors considered, the move down should continue and test the 1842 decision point in coming weeks. There is not enough technical evidence yet to definitively state that 1842 will hold. However, because of its importance, at a minimum, we expect at least a small upward correction to take place from 1842 once this target is met. Sustaining a close below 1842 would be extremely bearish for the long-term and could be the precursor to a bearish 2016.

This is a brief technical analysis of the S&P 500 Index based upon Kase’s technical forecasting models and trading indicator KaseX. If you are interested in taking a trial of KaseX please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

There is little doubt that the lack of demand for natural gas as a heating fuel this winter is taking its toll on prices. The market still looks and feels desperate to push higher, but fundamental and technical factors are working against this scenario. There is an outside chance prices could rally by another 10 to 15 cents on a close over $2.39, but we do not expect the move up to last much longer without a significant boost from external factors. In other words, it is going to have to get really cold, really soon, in key areas of the U.S., and last for several consecutive weeks for the move up to continue to any significant degree.

The move up from fresh 16 year lows stalled at $2.39 on December 29 and has subsequently oscillated in a narrowing range. A coil, or possibly an ascending triangle, has formed, and prices briefly broke lower out of the formation before Wednesday’s settlement. The formation indicates a breakout should take place very soon as the pattern nears its apex. The key levels to watch are $2.26 and $2.39.

Odds favor a break lower due to KaseX’s bearish turn signal (purple arrow) on the 3.5-cent Kase Bar chart. A close below $2.26 would call for $2.17 and $2.09.

As stated, there is a modest chance that prices could rally 10-15 cents on a close over $2.39. However, even if this is the case, we do not expect prices to overcome $2.55 given current circumstances.

By Dean Rogers

Tension between Saudi Arabia and Iran have the oil markets on edge. The global supply glut still hangs heavy and will reportedly last through 2016. However, recent the geopolitical tensions could push prices higher on fear and greed alone.

The indecisiveness is being reflected on the charts. WTI’s recent move up from $35.35 has been choppy, and is most likely corrective. However, it did form an intraday bullish flag last week. We do not put much weight into the flag though because its $36.22 swing low is only $0.87 higher than the $35.35 contract low.

WTI broke higher out of the flag early Monday, but failed to close above the upper trendline of the formation. This was negative, and the move down was preceded by a bearish KasePO divergence. Another test of support at $36.5 took place, but has held so far on a closing basis. $36.5 is the 62 percent retracement of the move up from $35.35 to $38.39. A KCDpeak (oversold) signal formed at $36.33.

The price action has now given us a clearly defined range between $36.5 and $38.0. Odds favor a close below $36.5. This would call for $35.7, which then connects to $34.91. Trading will remain choppy though, and external factors combined with the KCDpeak could still push prices higher. A close over $38.0 would call for the correction to extend to $39.2. For now, we do not see WTI rising much higher than $39.2.

By Dean Rogers

Evolving weather models that had previously predicted a cold spell in the Northeast U.S. and in the Great Lakes region are reportedly now forecasting above normal temperatures in early January. This could dampen the likelihood of a further price rally for natural gas in coming weeks, and the charts tend to agree.

Today’s decline was quite negative for the near-term outlook, and $2.16 is an important target that should be tested in coming days. This is near the 0.618 projection of the wave down from $2.386 and the 38 percent retracement of the move up from $1.80. A close below $2.16 would call for $2.09 and $2.03.

That said, this is a tough call right now because the market still seems desperate to rally after recently falling to 16 year lows. Wednesday’s decline could be a correction of the move up as prices attempt to extend toward a highly confluent $2.51 level. The late rally in trading after hours on Wednesday indicates $2.31 and even $2.37 might be tested in early trading ahead of Thursday’s EIA Natural Gas Storage report. We expect $2.37 will hold.

It is a bit early to call for a trading range, but we get the sense that is the most likely scenario for natural gas in coming weeks. The boundaries of the range could be quite wide, between approximately $2.03 and $2.37. Trading over the next few days should give us a better sense of what is in store for natural gas prices in early 2016.

Walt Disney Co. (DIS)

By Dean Rogers

“Well, the Force is what gives a Jedi his power. It’s an energy field created by all living things. It surrounds us and penetrates us; it binds the galaxy together.” You may think that I am referring to the legendary words spoken by Obi-Wan Kenobi to Luke Skywalker while teaching him the ways of the Jedi in “Star Wars” (later retitled “Star Wars Episode IV: A New Hope”). However, I refer to that quote because Walt Disney Co. has made the essence of Obi-Wan Kenobi’s statement about the Force the mantra of their capitalization on the Star Wars brand after acquiring Lucasfilm in 2012 for $4.06 billion.

For the past several months, and likely for the next several years, everywhere you look Star Wars branded items from toys, to clothing, to cars, and even makeup, surround us, penetrate us, and binds Disney’s marketing efforts together. I call it the “Essence of the Force Strategy”.

So far, Walt Disney Co.’s strategy has worked, and it has worked well. “Star Wars Episode VII: The Force Awakens” has already shattered world-wide box office records and has brought in over $1 billion since its opening in the U.S., and some think that it will bring in $1-2 billion more after its opening in China on January 9. Those figures will not even scratch the surface of what is to come from the Star Wars brand for Walt Disney Co. in merchandise sales, Episodes VIII and IX, and the expansion movies like “Star Wars: Rogue One” slated for release in December 2016. The key question is, will Star Wars be enough of a boon to support DIS and turn the stock price higher in coming weeks, months, and even years?

There is a lot more to Walt Disney Co. than Star Wars. They have made brilliant moves in recent years with their acquisition of Lucasfilm, Marvel Studios, Pixar, and The Muppets to name a few. However, there are other areas of Walt Disney Co., such as the rising sports right costs of ESPN, that weigh heavy in the minds of some Wall Street pundits. Enough so, that some are doubting the prospects of a long-term move higher for DIS shares.

DIS’s December decline, from a technical standpoint, is most likely a correction of the longer-term move up, and the breaking point is $101.3. Our price forecasting model, based on various components of technical analysis, shows that the long-term outlook for DIS is positive, but that the downward correction could extend in coming weeks before DIS overcomes key resistance at $114.5.

The following table shows the near-term targets and support levels along with probabilities of meeting those targets and levels within the next 10 trading days. This is a short-term forecast, but the implications of targets and levels discussed could have a long-term impact on the share price of DIS.

On Monday, December 28, KaseX confirmed a bullish turn signal (green arrow) and a first buy signal (yellow triangle). The combination of these two signals is called a pierced dart, and is usually a strong buy. The pierced dart puts short term odds in favor of a move to at least $108.5. This then connects to $110.5 and $114.5. A close over $114.5, which is near the 62 percent retracement of the decline from $120.65 to $104.3 and the $114.75 swing high, would indicate the long-term bullish move is going to continue.

However, the wave formations down from $120.65 and $114.75 indicate a deeper test of support might take place first. This hinges on a close below $105.6, which is near the 62 percent retracement of the move up from $104.3. A close below $105.6 would shift near-term odds in favor of a deeper test of support with $103.8 and $101.3 as the next thresholds.

The reason that $101.3 is the breaking point for DIS is that it is the 62 percent retracement of the move up from $90.0 to $120.65, the 1.00 projection for the wave $120.65 – 107.62 – 114.75, and the 0.618 projection for the wave $122.08 – 90.0 – 120.65. A close below $101.3 would not only call for the decline to extend to $96.4 and $93.7, the 1.382 and 1.618 projections of the wave down from $120.65, but possibly $88.6, the 1.00 projection of the wave down from $122.08.

The confluence at $101.3 indicates that DIS shares will be hard pressed to close below this level. We do not expect $101.3 to be broken, and as long as this level holds, it means Walt Disney Co.’s “Essence of the Force Strategy” is working and there may be a good buying opportunity on a move back up from $101.3 if prices slide this low.

This is a brief technical analysis of DIS based upon Kase’s technical forecasting models and trading indicator KaseX. If you are interested in taking a trial of KaseX please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

Crude Oil Forecast: WTI Approaches Crucial Support at $31.1

S&P 500 Index (SPX)

10-Year T-Note Futures (TY)

S&P 500 Index (SPX)

SPX Daily with KaseX

SPX Weekly with KaseX

Walt Disney Co. (DIS)