The WTI crude market had a very strong showing on Tuesday, breaking well above the $104 level. This market has been very parabolic, and I still think that there is a world of pain about to happen simply because a lot of this is based upon fear, and not necessarily anything substantial. My experience over the years has been that when a market should go straight up like this based upon fear and not anything substantial, but typically means that we are going to see a wicked selloff.
After all, markets cannot move in one direction forever, and this is based upon the idea that Egypt might actually close the Suez Canal. Anybody who thinks about this for more than a few minutes realizes how ridiculous that is, but sometimes markets become very irrational. After all, some of the people piling into this market on the long end are simply trying to take advantage of the fact that there is fear the market, and because of that they will simply look to take a quick scalps.
However, sooner or later rationality comes back into the marketplace, and in a situation like this that means selling. There will be a lot of it, and I believe that when we get that signal, we will more than likely fall right back to the $100 level.
Keep an eye on Egypt, but realized that this is all nonsense.
Like I said above, the Egyptian military is running the show and simply will not allow the Suez Canal to close. It's the only part of Egyptian economics that's working right now, and quite frankly one has to wonder how long it would take before the U.S. Navy gets involved. On top of that, the Egyptian military is funded almost directly out of the United States, and with that being the case, it is impossible to imagine that the military is going to do something to agitate the United States in general. That being the case, I feel that when we finally get that resistive candle, this will be an excellent selling opportunity.