Market Reaction to Negative Economic Data May Indicate Sustainability of Energy and Commodities Rally

On January 30, 2013 by TradingDesk

A major RBOB rally is in full effect after the contract earned its 9th straight trading session with gains Tuesday, and is already breaking the $3 mark this morning, a full 30 cents above where we were just 2 weeks ago.  The stretch is the longest consecutive win streak for the contract since the 2nd quarter of 2009 when it rallied from $1.36 to $2.11.  Coincidentally, the 2nd quarter of 2009 was also the last time the US reported a negative quarterly GDP, until this morning’s report showing that US economic activity slipped by .3% in the 4th quarter, sending a cautionary shot across the stock market’s bow as it too has continued a strong rally and is just a few points below record highs on several major indices.

For those looking for relief from the relentless run up in gasoline prices, it may be found in the stochastic indicator which shows the RBOB contract is in its most “overbought” state since the spring of 2010, which ultimately ended in a 30+ cent drop in prices once the May 6th flash crash sent shock waves through markets.  Meanwhile, HO continues its steady climb higher, casually breaking through resistance at $3.10, and now targeting its fall highs in the $3.25 range, while WTI appears poised to test $100.  Today’s price action, specifically the market’s reaction to some surprisingly negative economic data, will tell us a lot about the sustainability of the 2013 rally.

CLICK HERE for a PDF of this morning’s charts

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