Charts Continue To Favor Higher Energy Prices

On January 31, 2013 by TradingDesk

RBOB capped off its 10th straight day of gains in style Wednesday with a 6.5 cent increase. While the 36 cent rise over the stretch is impressive, we only have to look back to 2011 – when the average monthly range for RBOB was 34 cents – to realize how the lack of volatility over the past year had lulled many into a false sense of calm. With 4 months to go until we would normally expect a spring peak in gasoline prices, expect RBOB to continue to make the most noise. The entire complex is pulling back modestly this morning, but so far this looks more like just a “Reversal Thursday” pause rather than a change in our bull trend. Charts continue to favor higher prices, although all 3 major US contracts are in overbought territory and susceptible to some selling near term.

US Stock indices did see some modest selling Wednesday, after a disappointing drop in Q4 GDP and the FOMC announced nothing new in its January statement, but the move lacked conviction – especially after 3 straight months of strong rallies have pushed values near all-time highs, suggesting that the rally may have more room to run. The correlation between equity and energy prices is returning after a month-long hiatus, so this should help keep refined product prices supported.

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