- The WTI Crude Oil market rallied a bit during the day on Wednesday to test the 50-Day EMA.
- The 50-Day EMA quite often is followed by longer-term traders as a trend defining indicator, and we look at the chart you can see that the 50-Day EMA looks as if it is behaving like a downtrend line.
- It has been tested multiple times over the last couple of months, and therefore it makes quite a bit of sense that we would see the indicator continue to cause headaches for the buyers.
However, the meeting during the session on Wednesday involving OPEC + could have a major influence on what happens next. There are rumors out there than the meeting is going to see 2 million barrels pulled off the market every day as far as production is concerned. If that’s the case, then it should put upward pressure on the price, but one would have to think that the market has already priced most of that end.
Volatility Ahead
Alternately, if the market were to pull back from here in reaction to a less than 2 million barrel per day announcement, then we would continue the overall downturn. The $80 level underneath could be important, as it is a large, round, psychologically significant figure, and an area where we’ve seen a lot of action at previously.
Keep in mind that the 50-Day EMA has crossed below the 200-Day EMA a couple of weeks ago, which of course is known as a “death cross.” This is longer-term very signal, so it does suggest that there is a lot of selling pressure and negativity out there. I do not necessarily think that this is the end of the downtrend in oil, because a lot of people will be looking at this through the prism of demand destruction as well, especially considering that the global economy is almost certainly going to go into a slow down, so I think demand is almost certainly dropping. In that scenario, OPEC will be somewhat limited in what it can do. Regardless, the next couple of days should give us an idea as to where we are going over the longer term. Given mind that oil does tend to be very volatile, and of course a lot of rumors get leaked to manipulate the market.
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