The most salient feature of Thursday’s trading was the key reversal put in by WTI. We greatly respect these formation although we have instances where they were faded. Nevertheless the weakness was brought on following  James Bullard’s assessment that further easing is not implied by the recent data. Thus the immanency of the easing was removed from the market psyche. As we type WTI is testing its overnight low at 95.40. The storm in the Gulf still represents a threat. In fact, the threat is more pronounced this morning as the storm track has a more westward projection.

Moreover, the geopolitical scenario in the Middle East is anything but quiet. Thursday the Israeli Ambassador to the U.S. told the But the Israelis cannot go it alone. They need U.S. support. Their aircraft cannot reach Iran and make it back. They lack the range. However the Joint Chief of Staff said essentially the same thing last week, His words, “there really is no room to negotiate with Iran. Iran has increased uranium production by moving facilities underground.

All of this combined with the WTI pattern suggest a bounce off the 95.40 level. However we look to sell the sharp rally. But we also feel that the products will be the strong suit for the complex. Therefore if one is bullish buy the rbob and if one is bearish or wishes to hedge the position sell the WTI against it.

CRUDE: Hi: 96.28; Low: 95.41

As stated above, our model indicates a test of the overnight low. It is likely that this will mean a drop to 95.60. The key downside pivot is 95.40. However, a break of 95.00 will unleash another torrent of selling. That will push it down to the weekly trend of 93.50. There will be minor resistance at 96.70 to 96.90.. While the true upside pivot is 97.30, we would use a stop above 97.00 to mitigate risk. But we look to take advantage of extremes in today’s trading. The extreme upside area pertaining to this game plan will be 97.75 to 97.90.

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