- The West Texas Intermediate Crude Oil market has initially tried to rally but gave back gains rather quickly as we have seen inflation numbers come out much stronger than anticipated.
- Because of this, it looks like people are starting to price in the idea of a continued slow down economically, and therefore less demand for crude oil.
- With that being said, we also had formed the “death cross” which is a technical indicator that a lot of longer-term traders will pay attention to.
It’s when the 50-Day EMA drops down below the 200-Day EMA. It’s a longer-term sell signal, but I don’t necessarily take trades based on this right away. Ultimately, the market is likely to continue seeing this as a “fade the rally” type of situation, because quite frankly not only do we have a global slowdown coming, but we also have a strong US dollar. That is an ugly mix for crude oil, and demand should continue to be a major issue.
Global Slowdown Likely to Affect the Market
If we break above the highs during the trading session on Tuesday, that would be a positive sign, but I also see a lot of noise just above. The volume profile on my futures platform suggests that we are going to continue to see noise in that general vicinity, and therefore I think it’s likely that we will continue to see sellers at the first signs of trouble.
It’s not until we break above the $95 level that I would take a rally seriously, and even then, I think it would be a bit of a stretch. The $80 level underneath should be massive support, so if we can break down below their it’s likely that we could see a major falling out in this market. I don’t necessarily expect to see that happening easily, but it is something that is being threatened currently. With that in mind, I think you must be very cautious about any long positions, even though it looks like the Iranian deal is not going to go through. I think the market is focusing more on a global slowdown than anything else now. The market will continue to be very noisy, but it most certainly will probably favor the downside for the foreseeable future. You need to be position sized accordingly.
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