The West Texas Intermediate Crude Oil market has pulled back just a bit during the course of the trading session on Tuesday, as it looks like we are hell-bent on testing the $65 level. The $65 level of course will attract a certain amount of attention as it has offered support more than once, and therefore it is likely that the market will pay close attention to it. If we break down below the $65 level, then it is likely that we go looking towards the 200 day EMA. After all, the crude oil markets have been slumping a bit recently, and I think at this point in time it is starting to look like we are rolling over.
If we break down below the 200 day EMA, then it is likely that the market falls apart drastically, perhaps heading into a bigger negative move. The $60 level underneath the 200 day EMA would obviously cause a bit of attention as well. Another thing that has been working against oil as of late has been the US dollar strength that we have seen over the last couple of days, especially during the day on Tuesday. Rallies at this point in time will continue to be sold into, especially as the 50 day EMA sits just below the $70 level and is starting to slump lower. Ultimately, I think that is going to be a bit of a “ceiling” in the market.
If we do break above the $70 level, then it is likely that the market could go looking towards the $73.75 level, where we had sold off from previously. I would draw attention to the fact that we have formed several “lower highs” but have yet to form a “lower low.” As soon as we formed a lower low, that would be a very negative turn of events, and therefore we probably see more momentum to the downside. Nonetheless, I think we need to pay close attention to the risk appetite as crude oil is very sensitive to it. The market is also making a bit of a descending triangle, so that should be paid close attention to as well. If the global growth story continues to be a bit shaky, that will not help the growth of oil either, so I think there are a lot of moving pieces but there so much uncertainty out there it seems as if it is easier to go lower.
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