I certainly think that a move to the downside in the short term would be healthier than to simply break out to the upside, so that is what I am hoping to see.
The West Texas Intermediate Crude Oil market initially shot higher on Tuesday, only to turn around and show signs of exhaustion. The market looks as if it is going to pull back at this point, and it needs to do so. With that being the case, the $75 level is worth paying attention to, as it is a large, round, psychologically significant figure, and an area where we had sold off from previously.
That being said, we have formed a bit of a shooting star and are showing signs of exhaustion, which is a signal that we need to pay close attention to as a lot of retail traders will be shorting. That being said though, if the market does break down it is likely that it is only temporary, as we see the over-extension succumb to the idea of gravity. The 50-day EMA underneath is sitting at the $70.25 region, so I think that is essentially going to be your short-term floor.
On the other hand, if we were to turn around and break above the top of the shooting star, then the market is likely to shoot straight towards the $77.50 level, possibly even the $80 level. At this point, the market is probably going to see even more downward pressure as it is such a large, round, psychologically significant figure. That is my target for the longer term, but I think that the market probably needs to pull back in order to build up the necessary momentum to get there. I certainly think that a move to the downside in the short term would be healthier than to simply break out to the upside, so that is what I am hoping to see.
Ultimately, it is simply only a matter of time before we see some type of supportive candlestick on a pullback, and that is essentially what I am waiting for. When we look at the markets overall, you need to pay close attention to the US Dollar Index, as it is going to be somewhat negatively correlated at times. At this point, I have no interest in shorting this market, at least not until we break significantly below the $70 level. That is something that is not going to happen anytime soon.