The WTI Crude Oil initially fell during the session on Tuesday, but as you can see the bottom of the range offered enough support in order to bounce this market high enough to make a serious challenge to the top of the shooting star from Monday. Look at this chart, we can see that this market is deftly try to breakout to the upside, but there is enough resistance above in order for us to be a bit hesitant to start buying, and because of this we are simply on the sidelines.
However, if the bottom of the shooting star from Monday gets broken to the downside, we think that this market will continue to fall and reenter the previous consolidation area. That actually makes sense to us, simply because the area above the current trading range is closer to the $100.00 level which is a bit uncomfortable for us. We think that large, round psychologically significant number will more than likely offer quite a bit of resistance, as it has in the past.
The market going forward could offer a resistive candle in the next dollar or two, and I feel that is without a doubt the easier trades to take. It isn't until we get above the $100.00 level that I feel comfortable going long. Because of this, I think that this market will continue to be volatile, and my suspicion is that a lot of the bullishness that we have seen recently is the fact that the US dollar has seen significant weakness.
Watch the Dixie
The US Dollar Index, or the "Dixie", measures the strength of the US dollar overall, as seen against six other currencies. Because of this, we feel that this market will be greatly affected by that particular contract. Simply put, as the Dollar continues to strengthen, oil falls and vice versa. Since the US dollar has been so weak lately, I believe that is what pushing up the oil markets, and I also believe that Mr. Bernanke’s testimony later today after the FMOC meeting could very well have a great effect on the Dollar, which will have a great effect on this contract. The wise trader will simply stay out of the market during the session, and we do see what the market does after his question-and-answer session. However, I feel much more comfortable shorting at this point.
