- The West Texas Intermediate Crude Oil market gave up early gain during the trading session on Monday, as we shot above the $75 level, only to see more selling pressure.
- After all, crude oil has been very beaten down over the last several months, so should not be a huge surprise at all to see that we have turned around a bit.
- I do believe that ultimately the market has to weigh whether or not we have a situation where the demand will pick up her fall, and quite frankly it looks like it’s probably going to fall.
We are at extremely low levels so you would expect the occasional bounce. I think that’s a lot of what we had seen on Monday, as everybody went a little bit off the deep end over the falling wages in the United States, suggesting that perhaps the Federal Reserve could slow things down. There was literally nothing that was in that report that would make the Fed change its mind, and although we moved in the “correct direction”, we still have miles to go from anything remotely close to a loosening policy.
US Dollar Likely to Strengthen
Because of this, the US dollar could strengthen again quite rapidly, or worse yet, we could see demand drop even further. Oil markets are suffering with good reason, and I do believe that they have a major resistance barrier in the form of the 50-Day EMA which currently sits right around the $80 level. Breaking above all of that would be very bullish, but I just don’t see that happening quite yet.
The fact that we gave back so much of the games rather quickly tells me that this market is not ready to go much higher, at least not in the short term. I do believe that the $70 level underneath should be significant support, some not necessarily looking to break through there anytime soon, but I think we are going to enter some type of slightly negative consolidation area. I believe now, this is more of a “fade the rally” type of market than anything else. If that’s going to be the case, then we have a situation where we could continue to employ the same tactics, at least until something fundamentally changes.
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