- The West Texas Intermediate Crude Oil market has rallied a bit during the session on Tuesday, as we continue to see a bit of a recovery in this market that has been so oversold.
- It’s interesting that we broke above the inverted hammer from three candlesticks previously, and therefore I think you’ve got a situation where buyers are starting to flexor muscles.
- However, I don’t necessarily think that there exists a lot of reasons to get long.
The 50-Day EMA has reached below the $82 level and now looks as if it is trying to offer a bit of an artificial ceiling. The dynamic resistance that we see at the 50-Day EMA is something that a lot of people pay close attention to, and therefore I think that would be a very difficult thing to overcome. If we did break above the 50-Day EMA, that would obviously be a very bullish sign, perhaps allowing the oil market to turn completely around and go very strong to the upside. I don’t think that’s going to happen anytime soon though, and the bullish pressure that we have seen as of late will end up being a bit of short covering more than anything else. Simply put, we got far too oversold to continue the downward pressure.
The market is Very Noisy
When you look at the global economy, there’s almost nothing out there that suggests we are going to see a lot of demand for crude oil, but obviously markets don’t go in one direction forever. You should keep in mind that this is a market that is very noisy, and therefore it’s not overly surprising to see a complete turnaround. The CPI numbers in the United States going lower does suggest that perhaps inflation is coming back down, and the idea is that someday the Federal Reserve may start to lose monetary policy, therefore driving up overall stimulus.
At this point, we also must worry about the Federal Reserve meeting on Wednesday and of course the ECB meeting on Thursday. I think by the time we get through all of this, we will more likely than not see a nice selling opportunity for crude oil, so it’s just a matter of hanging back and letting the market run out of momentum from the bounds to take advantage of what is a very staunch and obvious trend.
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