- The West Texas Intermediate Crude Oil market rallied on Friday to show signs of life again, reaching the 50-Day EMA.
- This is an indicator that a lot of people will follow, so does make a certain amount of sense that we pull back a bit by the end of the session.
- There’s also something more important to watch just above, and that will be the $80 level.
- In that environment, I do think that we have more negativity ahead of us than positivity, and every time we do rally, I’d be looking for an opportunity to short-foil. This will be the case for a while, as the global economy starts to slow down.
This is especially true with the Chinese economy and its pandemic problems. The reopening of trade in China ended up being a reopening on its people, so therefore I think we’ve got a situation where the demand in China will continue to wane, and then the course will hurt markets. However, the physical markets are constrained abed, so there is a little bit of a “push/pull” type of dynamic. If we bring down below the bottom of the can sit on Friday, then I think we start to see more selling pressure, perhaps a move down to the $75 level, followed by the $72.50 level.
Keep Your Position Size Reasonable
With the markets being so thin over the next five days, you probably have no real business trading this market but if you choose to the most important thing, you do is keep your position size reasonable. After all, with a lack of volume, you could get a situation where news could make the markets move quickly. You don’t want that, and Murphy’s Law dictates that you’ll be on the wrong side of the trade anyway. Keeping your position size reasonable is a way to protect yourself, as there will be plenty of opportunities in the future.
In fact, I suspect that it’s not till we get the jobs to report in early January that the full volume of the market comes back, so you should trade cautiously between now and then. It is worth noting that we are no longer a term downtrend, so do keep that in mind. It’s all things being equal, I expect a “fade the rally” type of environment.
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