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

RBOB Gasoline futures tested support at 167.43 on Monday and have taken out the crucial 169.25 swing low. The outlook is negative, but many technical factors, including Monday’s dip below the lower Bollinger Band, indicate a correction should take place once 160.0 is met. This is the confluence point between the 62 percent retracement of the move up from 122.65 and the 1.618 projection for the primary wave down from 218.58.

Look for resistance at 172.3 and 181.3. The latter is expected to hold.

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

By Dean Rogers

Natural gas continues to oscillate in a range between $2.65 and $2.95 as weather forecasts change from week-to-week. “Sweltering” heat in the US Northeast is the latest reason reported for this week’s price rise.

However, it is important to keep in mind that the shifting weather forecasts and related events have kept the market range bound for the last few months, and even if prices do break higher the move is still corrective of the longer-term down trend.

If I sound skeptical of the move up, it is because I am, but as of Wednesday’s close most technical factors indicate $2.95 may be challenged again. These factors show that the key to testing $2.95 is a close over $2.87. This crucial resistance level was tested a few times on Wednesday. It is the 62 percent retracement of the decline from $2.957 to $2.735, near last Thursday’s midpoint, and a confluent projection for the small waves up from $2.735. A close over $2.87 would call for a test of $2.95, which is in line with the 0.618 projection of the wave $2.656 – 2.957 – 2.735.

KaseX’s buy signal (green diamond) is promising and the pullback from $2.87 held the 38 percent retracement of the move up from $2.735. Look for prices to push above $2.87 in early trading tomorrow and to possibly overcome $2.95 in the event that the EIA storage report is bullish.

Near term support is $2.79, the 62 percent retracement from $2.735 to $2.87. This level should hold provided the move up is going to challenge $2.95. A close below $2.79 would shift the near-term outlook to negative and call for $2.73.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. 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. We also offer trials of our KaseX trading indicator.

By Dean Rogers

Crude oil has taken on a strong bearish tone. There is very little technical evidence, and even less fundamental evidence, that the decline is going to end. However, it is almost always darkest before dawn and there are a few factors that show a correction should take place soon.

Last week’s update discussed major support at $47.0 for WTI and September Brent crude oil is quickly approaching major technical support at $52.8. This is the 1.618 projection for $71.37 – 62.3 – 62.49, the 0.618 projection for $67.49 – 55.6 – 59.9, and the lower Bollinger Band. The KasePO, shown in the middle panel of the chart above, and KaseCD, in the bottom panel, are setup for divergence and nearly in oversold territory. These factors indicate $52.8 is a potential stalling point and that a correction might take place before the decline continues to the next targets.

A normal correction will hold $55.6, the 38 percent retracement from $59.9. Key resistance is $57.2, the 62 percent retracement. We expect $55.6 to hold before the next leg lower takes place.

Natural gas is idling in neutral again and is struggling to overcome key resistance levels. We are still negative for the longer-term, but the near term outlook is looking slightly positive.

The small move up is confirmed by long KaseX signals (green diamonds) on the $0.035 Kase Bar chart. In addition, Wednesday’s close over $2.895, the 1.00 projection for the wave up from $2.785, has opened the way for its 1.618 projection near $2.96. The $2.96 target is crucial because it is the 0.618 projection for the wave up from $2.644. A close over $2.96 would call for an extended correction to targets above $3.00.

Other than the quick move up from $2.644, the recent move up has lacked conviction. A daily evening star setup and hanging man indicates traders are still not quite sure if the market is ready to make the push higher. Tuesday’s $2.84 open is first support, and a close below this would call for another test of the $2.785 swing low.

Prompt month WTI crude oil futures briefly fell below $50.0 on Monday and settled at the lowest level since April 2. The deal with Iran has led to fresh concerns about the global supply glut and most technical factors are negative. RBOB gasoline is lending some support, but on balance, the decline is poised to extend into the mid- and possibly low-$40s where the March 18th low of $42.03 would be challenged.

Prices broke lower out of the near perfect intraday bearish flag discussed last week. September WTI futures, which will become the prompt month on Wednesday, also settled below key support at $50.6 on Monday. This was the 1.618 projection of the wave $64.45 – 57.09 – 62.51. This is likely Wave I of a five wave trending pattern that should unfold to at least $47.0 and possibly $42.5. The five-wave pattern is not perfect, but the close below $50.6 and the bottom of Wave III leaves little room for any other interpretation.

When a five-wave pattern forms at least two of the three impulse waves (I, III, or V) should be equal. At $47.0 Waves I and V will be equal and at $42.5 Waves III and V will be equal. Structurally, both $47.0 and $42.5 fit the structure of the five-wave pattern because $47.0 is the 0.618 projection of Wave III, $62.51 – 50.95 – 54.35 and $42.5 is the 2.764 projection for Wave I.

It is important to note that $42.5 is the lowest that the five-wave pattern projects. Therefore, unless the structure of the wave formation drastically changes, it is not likely that prices will fall below $42.5 in coming weeks.

Odds favor the decline, but the market still seems a bit unsure of itself. As stated, there is some support being wrought by RBOB gasoline, but it ended Monday on a negative note by forming an evening star setup. The move down will likely be a grind and small tests of resistance will be commonplace. First resistance is $51.8 followed by $52.8, which is expected to hold. Key resistance is the $54.35 swing high. A close above this would negative the five-wave pattern and open the way for an extended correction and potential recovery to $59.3 and higher.

Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.

August natural gas is attempting to rally above $3.00 after stalling at $2.644 last Thursday. The surge over the last week may be a desperate attempt to push prices to targets above $3.00 before summer’s end, and is being driven by speculation of above normal temperatures through the end of this month and into August.

The near-term outlook took a positive turn Wednesday when prices closed above $2.884, the 0.618 projection of the wave $2.588 – 2.977- 2.644. This clears the way for a rally to the 1.00 projection of $3.03. This is a potential stalling point for the upward correction. A close over $3.03 would call for the $3.20 confluence point with intermediate resistance at $3.11.

Caution is warranted though because it is a bit early to get overly exuberant about a bullish recovery. The balance of bullish and bearish factors is razor thin and shifts day-to-day. The move up is almost certainly corrective of the longer-term decline. Do not be surprised to see prices pull back and settle below $2.82 on Thursday should there be a disappointing EIA storage report. This, in turn, would call for $2.75 and lower.

by Dean Rogers

Read on TraderPlanet

The recent Chinese stock market downturn and depressed economic outlook by many economists for the second quarter and through year’s end for China’s economy has commodity prices backpedaling. Many components of the Thomson Reuters Core Commodity CRB Index, and the Index itself, have either fallen to new lows or are poised to test lows that were made earlier this year.

In addition, the nuclear deal with Iran also raises concerns about an increased oil supply glut, and energy is one of the most heavily weighted components in the CRB Index. In fact, on March 18, 2015 the CRB index fell to 206.13. This coincided with WTI Crude Oil’s $42.03 low. Both are on the teetering edge of challenging this year’s lows.

The question is: Will commodity prices and the CRB Index fall to a new low for 2015?

The gap lower from 224.107 on July 6^th was the catalyst for the decline to 213.107. The wave 233.531 – 218.917 – 229.328 met its 1.00 projection at 213.107. This was also the 1.618 projection for the wave 229.328 – 221.095 – 227.473, and just below the 62 percent retracement from 206.813 to 233.531. The confluence of wave projections and retracements at 213.107 make it a decision point for a continued decline.

Taking out 213.107 would call for 203.5. The aforementioned waves down from 233.531 and 229.328 project to 203.5 as the 1.618 and 2.764 targets, respectively. This is also the 1.00 projection for the wave 227.473 – 213.107 – 219.898, and most importantly, the 0.618 projection for the large-scale wave 473.91 – 200.16 – 370.72. The importance of 203.5 make it a likely stalling point.

A sustained close below 203.5 would be the result of a deeply negative outlook for the global economy. In this case, the next targets would be 192.0 and 178.6.

That said, the move up from 213.107 is testing resistance at 220.9. This is the 38 percent retracement from 233.531, near the bottom of July 6^th’s gap, and the midpoint of April’s candlestick. A close over 220.9 will call for 227.5. This is key resistance because 227.5 is in line with the 227.473 swing high, the top of the gap at 224.107, the 62 percent retracement of the decline from 233.531, and the 0.618 projection of the wave 206.813 – 233.531 – 213.107. A close over 227.5 would open the way for 238.1 and 248.1.

The upward correction was preceded by daily bullish divergences on the KaseCD, MACD, and slow stochastic. In addition, a bullish morning star setup and hammer has formed on the weekly chart. These factors indicate the upward correction might extend to fill the gap and test 227.5 before the decline continue. Overall though, with all factors considered, 227.5 is expected to hold and odds favor a decline to 203.5.

Send questions for next week to askkase@kaseco.com, and for our weekly energy forecasts visit www.kaseco.com/services/energy-price-forecasts/.

Perfect geometric formations are a rare commodity. They are useful gems of information that can tell us a lot about a market’s outlook and general direction. It is important to pay attention to the implications of a successful break out of the pattern, and it is even more important to watch for patterns that fail.

WTI’s bearish flag on the $0.50 Kase Bar chart is as close to a textbook example as one will ever see. Flags are extremely reliable continuation patterns. Because this flag formed after a decline, and is sloping upwards, it is a bearish pattern that indicates the move up is corrective and that the decline should continue.

The waves within the flag have fulfilled the 1.00 projection for the wave $50.58 – 53.43 – 50.91. This is significant because it is evidence that the move up is unfolding as a three-wave ABC pattern, which is more evidence that the move is corrective.

Prices settled in the lower half of the formation on Monday, which does not bode well for another test of the upper trend line. A close below $51.8, which is near the bottom trend line, would indicate the move down is going to extend to at least $49.9. Our detailed weekly analysis discusses the connections to targets in the mid- to low-$40s upon a break lower.

There is an outside chance that the formation will fail, but prices will need to close over $54.8 to prove that an extended upward correction and potential recovery is underway. Technically, the flag will fail upon a close over the upper trend line, which is currently $54.2. However, for many technical reasons, $54.8 is the threshold for a positive near-term outlook. Most importantly, it is near the 38 percent retracement of the decline from $62.22 and the midpoint of July 6th.

For now, watch the flag formation closely. Odds favor a break lower and close below $51.8. The directional breakout of this pattern will be a strong clue as to the direction of WTI for the next several weeks.

After the 4th of July weekend the energy markets, unlike the weather across most of the U.S., heated up. The lack of warm summer weather in key areas of the county has given way to lower prices for natural gas. August natural gas futures finally closed below $2.73 on Tuesday and Wednesday. The move has been quiet relative to the noise being made by crude oil, but the break lower indicates prices should continue to decline. That said, the bullish KaseCD divergence and KasePO PeakOut (oversold signal) on the $0.035 Kase Bar chart indicate the decline will be a grind.

The wave $2.977 – 2.733 – 2.885 took out its 0.618 projection at $2.73, therefore odds favor at least $2.64, its 1.00 projection. This is a highly confluent and important target that protects the $2.588 swing low. We expect to see a bounce from $2.64 given its importance. A close below $2.64 would call for $2.55 and $2.50.

The 38 percent retracement from $2.885 to $2.676 is $2.76. Key near-term resistance is $2.81, the 62 percent retracement. Both levels are in line with the two previous intraday swing highs of $2.756 and $2.80. A close over $2.81 is unlikely unless tomorrow’s Energy Information Agency (EIA) report is extremely bullish.

As predicted WTI crude oil has broken lower out of the recent trading range and fell by nearly eight percent on Monday. The important 1.382 projection was met at the $52.41 swing low. Key support at $50.5 should be tested tomorrow. We consider this a decision point for a much more bearish outlook and decline into the mid-$40’s. Today’s action may even dust up talks about the $30s again, though we think that conversation is a bit premature. Look for resistance at Monday’s $54.4 midpoint. This may be tested in early trading Tuesday, but should hold.

Is RBOB Gasoline Due for a Correction?

The question is: Will commodity prices and the CRB Index fall to a new low for 2015?