The WTI Crude Oil markets fell hard during the session on Friday, breaking below the all-important $96 handle. In fact, we even saw the market fall below the $95 handle, which is something that I didn't anticipate. I have to admit that the weakness in the oil markets have kind of caught me off guard, and as a result I have missed this move.
However, I believe that we may be looking at a repricing of global growth at this point in time. I do believe that ultimately the US dollar will not strengthen much, simply because sooner or later traders will start to look at the fact that the Federal Reserve cannot taper off of quantitative easing. If that's the case, then eventually dollar denominated assets will become more expensive, especially commodities.
History repeats itself
One of the main points of technical analysis is the fact that history tends to repeat itself over and over. With that being the case, I believe that eventually we will see oil markets rise on the back of a falling dollar. Eventually, markets will get concerned about the fact that the Federal Reserve cannot taper off of quantitative easing, and any signs of global growth will send the depreciation of the US dollar into high gear. When that happens, anticipate oil markets to absolutely explode to the upside as they have been sold off so viciously.
With that being the case, and the fact that I have been so wrong the last couple of weeks, I have a bit cautious about this market. However, I do recognize the fact that a break of the lows for the Friday session is a short-term selling opportunity, but also understand the fact that this market is a bit oversold at this point. With that being true, expect to see some type of bounce relatively soon. We don't have the supportive candle at this point, and I do think it is possible that this market goes down to the $90 level. However, expect a bumpy ride as conflicting forces will begin to argue over the more important factor: the value the US dollar, or the slumping global economy.
.jpg "Crude Oil Daily")