I think the next couple of weeks will be very crucial for oil, because we either are getting ready to see a rather significant pullback, or we could see a breakout.
The West Texas Intermediate Crude Oil market initially tried to rally on Friday but gave back the gains as the jobs numbers came out horrible. The United States released employment figures 500,000 less than anticipated. This will have a major influence on the idea of demand for crude oil, while at the same time OPEC is looking to increase production. The question now is whether or not the demand is going to keep up.
We are sitting just above the 50-day EMA so that is something to look at, but the downtrend line that I have marked on the chart has been relatively reliable so far. Another thing that gives credence to that downtrend line is the fact that the $70 level sits just above there, and that will be a large, round, psychologically important figure. That being said, I would anticipate that a move above that $70 level could open up a move towards the $74 level rather quickly.
If we were to break down below the candlestick from the Thursday session, I think that open up more selling. We would probably test the hammer from the Wednesday session, and breaking that to the downside almost certainly opens up fresh selling. This is a market that has been very noisy as of late, and it is worth noting that while the dollar got pummeled, the oil market did not benefit from that. This tells me that it is possible that we will see money flowing into the bond market more than anything else, which could turn the US dollar around. If that happens, that could put downward pressure on this market as traders start to contemplate the idea of perhaps the economy is not recovering quite the way it had been perceived. Furthermore, there is the narrative that the delta variant is driving down the employment situation, but that also will drive down the consumption situation. I think the next couple of weeks will be very crucial for oil, because we either are getting ready to see a rather significant pullback, or we could see a breakout. Either way, I will be willing to play in the appropriate direction, once we get a little bit of confirmation. Until then, let the market tell you what it is about to do.