It seems like many markets don’t know what to do — there are just so many highly critical factors at play globally. We have the European debt situation of which there truly is no overnight fix. We have the escalating Middle East tensions with Israeli and Iran political leadership becoming more vocal with their ideas on how to proceed with their respective national goals. We have US economic data looking great one day (housing numbers) and the next day not looking so hot (durable goods orders plummeted today). We have a QE3 plan which rallied the market into the news release, but now many are questioning its effectiveness in boosting key economic measures such as GDP and employment. What is a trader and investor to do? One longstanding comment in trading circles has been “don’t fight the fed.” If this is the case now, one still might think to be bullish the US stock market. We shall see how this unfolds.
For today we focus on RBOB Gasoline futures. Since the large 25 cent sell-off at the beginning of this month, RBOB has staged a nice rally to the $2.95 level. It looks a bit overbought to us, and we anticipate a possible reversion to the halfway point of this recent rally which comes in at $2.87. Seasonal trends indicate a drop in RBOB might occur, however key fundamental factors such as Middle East uncertainty plus lower supply numbers may provide support for this market. We see chart support at $2.80, and the August high is $2.90. We believe this market can remain bullish staying above $2.80. If this market breaks down below $2.80, we look for the seasonal downtrend idea to occur, especially into elections when gas prices have tended to decrease.