WTI Crude Oil Forecast: Crude Oil Plunges Through Support

• The West Texas Intermediate Crude Oil market has broken significantly through support during the trading session on Friday, as the $80 level is now in the rearview mirror.
• The market is likely to continue to see a lot of noisy behavior, as the crude oil market is highly sensitive to global growth.
• Global growth comes down to whether or not inflation can be beaten back, and right now it looks as if we are going to struggle.

“Fade the Rally” Type of Situation

Looking at this chart, I think that you’ve got a situation where the market continues to be a “fade the rally” type of situation, with the $85 level offering a bit of a ceiling in the short term. The 50-Day EMA sits just above the $90 level and is continuing to drop. I think that will be a major trend defining indicator going forward.

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If we break down below the bottom of the candlestick that we have printed for the session on Friday, then it’s likely that the crude oil market will then go look into the $75 level. Keep in mind that the Federal Reserve continues to tighten monetary policy, and that will have a huge effect on the demand for oil and of course will continue to strengthen the US dollar. The US dollar rising means that there will be less of them necessary to buy a barrel of oil, so the negative correlation in the Forex market should be noted.

That being said, the market is likely to see a lot of negativity out there, as the demand is going to drop through the floor. The WTI Crude Oil market has recently seen the so-called “death cross” form, when the 50-Day EMA breaks down below the 200-Day EMA. That’s a longer-term bearish sign, but more often than not is far too late to use. When you look at the chart, you can see that we are in a downtrend channel, and therefore it’s likely that we continue to see plenty of fading of attempts to recover. We’ve been in a downtrend for a while, and therefore I think we will continue to see that play out. I have no interest in trying to pick up this market anytime soon, although I do recognize that a bounce needs to happen sooner or later.

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