The WTI markets fell during most of the session on Monday, but bounced in order to form a hammer by the time the markets closed. This of course is a supportive sign, and therefore I think this market is trying to build a bit of a base in this general area to bounce to perhaps the $98.50 area. The market has been oversold to say the least, and as a result I would assume that a bounce has to come fairly soon. This market should see a lot of support in the $95 area, as well as below all the way down to the $90 level.
The market is generally reflecting several views at once, and as a result it is a bit difficult to figure out which attitude will prevail. What I mean by that is the fact that the Dollar is going to continue to be suspect as the Federal Reserve is probably going to have to wait a while to taper off of quantitative easing, no matter what the jobs numbers said on Friday of last week. Adding to the confusion is the fact that the global demand could be shrinking at the same time, driving down the price of oil as the markets try to adjust even further. In other words, there are a lot of different forces pushing and pulling the oil markets at the same time.
Accumulation phase?
Looking at this chart, it is possible that the area we are in at the moment could be the “accumulation phase.” This is an area that the markets try to build up pressure to the upside as the so-called “smart money” looks to take advantage of perceived value in the marketplace. As oil has been so beat up, it’s hard to imagine that there aren’t at least some big money players willing to take a shot at these relatively low levels. Because of this, I believe that oil could see a bit of buying in this region, but will more than likely struggle with the $98.50 area as it looks rather resistive.
