I think that we need to watch the next couple of days, although we clearly have nothing but chop in the short term.
The West Texas Intermediate Crude Oil market rallied a bit on Wednesday to test the downtrend line that I have been paying close attention to for quite some time now. Because of this, it looks as if the market is trying to figure out where it wants to go next, but it is also a market that has been going sideways. The 50-day EMA is going flat, so that suggests that we do not have anywhere to go. That being said, the market will not sit still forever, and it is probably only a matter of time before we have to make a bigger decision. Because of this, I think what we are looking at here is a scenario where we will simply grind back and forth until we can either break above the downtrend line or break down below the $67.50 level.
On a breakdown below the $67.50 level, the market is likely to go looking towards the $65 level, possibly even lower than that. At that point, I would look for the 200-day EMA to offer a little bit of short-term support, but whether or not we bounce from there remains to be seen. If we give up the 200-day EMA, one would have to think that the entire uptrend is over. One thing is for sure: this downtrend line is at least putting that thought into some people’s heads. Furthermore, we have to worry about the delta variant, so having said that it is likely that the demand for crude oil could be something that people were concerned about.
On the other hand, if we were to turn around and break above the $70 level, that would be a very bullish sign, as we would not only clear the downtrend line, but we would also clear a significant psychologically important figure. Because of this, I think that we need to watch the next couple of days, although we clearly have nothing but chop in the short term. Another thing that may be causing a little bit of a knock on effect over here is the fact that natural gas has gained over 8% for the day, so energy market is certainly an interesting place to be right now.