- The West Texas Intermediate Crude Oil market has broken above the 50-Day EMA, albeit just barely.
- At this point, you must look at this market through the prism of quality trading, and the lack of liquidity.
- Because of this, I would not read too much into the movie, other than the fact that people continue to look at the possibility that profit-taking is still going on.
- There’s also the argument that the underlying physical supply of oil is running tight, and while that’s certainly true, there are also a lot of people out there worried about the lack of demand.
At the same time, you must keep in mind that with the global economy slowing down is very likely that demand for oil will drop. We also have the $82 level just above that could cause a bit of a headache, so in that scenario, we have potential resistance. I think as we head toward the end of the year it’s very likely that the market will run into a liquidity problem, as well as a lack of interest. I do see a lot of resistance just above the $82 level, and I think that continues to be the main factor.
This is a Very Tricky Market
If we turn around and break down below the $80 level, that would be a negative sign and could open the possibility of lower pricing. In that scenario, the market heads to the $75 level. After that, we could be looking at $70 yet again. Oil is a very tricky market under the best of scenarios, so keep in mind that the lack of volume and of course bigger players will continue to be an issue.
With that being the case, I suspect that we have a situation where you are looking to fade signs of exhaustion when we get them. We won’t have the real look at the economy until we get the jobs to figure in January, so most of what we are seeing now is going to be Brownian motion, or essentially the market turning back and forth. I think we also have seen a nice rally because a lot of people are short covering to take profits heading into the end of the year and to report to their clients.
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