The West Texas Intermediate Crude Oil market broke down significantly during the trading session on Wednesday to slice through multiple areas of support. The initial part would have been the $99 level, but we also have the 50-day EMA that is coming into the picture. Now that we sliced through that as well, it is a very negative look to this market right now, and it is more likely than not going to continue to cause major issues. I do believe that the uptrend line being broken is a very negative sign as well, so it is possible that we could be looking at the end of the uptrend in oil.
We have seen several “lower highs”, and I think you should take a look at this through the prism of whether or not demand is getting crushed. After all, we have seen a build in inventory and a drop in demand for gasoline. It seems as if we have potentially reached a peak in the market, and of course demand. Remember, the entire story of crude oil rallying was due to the fact that the markets were reopening after the pandemic, and there would be a huge surge in demand. However, it now appears that a lot of economies around the world could be going into recession and that in and of itself could cause major problems for crude oil.
If we do break down from here, it is very possible that the $90 level will be the target, but that does not necessarily mean that we will get there overnight. However, it is obvious that there is a lot of weight around the neck of the market right now, and at this point, I would need to see it break back above the $105 level that I would be comfortable buying. This is a market that continues to see a lot of volatility, but I think we have finally capitulated to the idea that perhaps things are not as strong as once thought. If that continues to be the story, then it is difficult to imagine a scenario where crude oil suddenly takes off to the upside. At this point, I think that we will continue to see a lot of downward pressure, so I have switched from buying the market to selling it.
