I do believe that the longer-term outlook for crude oil is probably going to be very dependent on GDP figures, and central-bank policy. 

• The West Texas Intermediate Crude Oil market rallied again on Monday, to break above the 200-Day EMA.
• This is a bullish sign, and at the end of the day we are hanging around the 50-Day EMA as well, perhaps trying to keep the market from forming the so-called “death cross.”
• There are a lot of different things going on in the crude oil market that you need to be aware of, and therefore it’s not exactly the easiest market right now to be involved in.

For example, we are near 2 of the biggest moving averages, but we also have a rising wedge that measures for a move to about $100 or so. In other words, the bullish pressure may be somewhat limited based on a little bit of chart reading. However, charts do not move markets, it’s the other way around.

The Iranians possibly being able to throw another 1 million barrels of crude oil into the market certainly could be negative. However, OPEC is also starting to talk about production cuts, because they believe that the “paper price” of crude oil does not represent the actual physical issues in the real world. That’s probably true because all one must do is look at the silver market to understand that being a possibility.

Recession and Monetary Tightening Likely to Bring Down Prices

Nonetheless, I believe that the upside move is probably somewhat limited in the short term because we must worry about the fact that economies around the world are slowing down, and that means that demand for crude oil will continue to fall. That doesn’t necessarily mean we need to break down significantly, just that it may put a bit of a drag on price.

In this scenario, I prefer to keep my position size rather small, and I recognize a trading crude oil right now is probably more of a gamble than anything else, but I do believe that the longer-term outlook for crude oil is probably going to be very dependent on GDP figures, and central-bank policy. As central bankers continue to tighten monetary policy, that should in theory bring down demand for crude oil as economies enter recessions. Because of this, I think it’s probably only a matter of time before we see an exhaustion candle that we can start to think about shorting.

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This is a market that I think continues to see choppy volatility.

• The West Texas Intermediate Crude Oil market has pulled back a bit, losing over 2% during the trading session on Thursday.
• Because of this, the market is likely to continue to see a bit of selling pressure, and the 200-Day EMA looks as if it is offering a significant amount of resistance.
• Furthermore, the 50-Day EMA is sitting just above there and is dropping, so it’s likely that we would see some type of “death cross” form in that area.

Looking at the situation in the oil market, you need to pay close attention to the fact that there are a lot of moving pieces. The Saudi government has recently started complaining about the fact that the paper market is not keeping up with the physical market, and therefore they may cut production to boost prices. On the other hand, there’s also the possibility that Iran may be able to enter the markets if they sign some type of deal with the West when it comes to nuclear constraints. If that’s the case, that could add 1 million barrels a day.

Market Expects Volatility

Furthermore, you have the Federal Reserve and its monetary policy. The Chairman of the Federal Reserve Jerome Powell will be speaking on Friday at the Jackson Hole Symposium, and traders will try to figure out whether the Federal Reserve is going to get aggressive as far as being hawkish is concerned. This is a market that I think continues to show a lot of noisy behavior, therefore it does make quite a bit of sense need to be cautious with your position size, assuming you are involved in the market at all.

If we can break above the 50-Day EMA, then it’s possible that we could go to the $100 level. If we can break above the $100 level, then it’s possible that the market could go looking to the $105 level. On the other hand, if Jerome Powell becomes hawkish, it’s possible that we could see oil drop due to the idea that the Federal Reserve is going to slow down the economy, and therefore demand for crude oil could drop through the floor. All things being equal, this is a market that I think continues to see choppy volatility.

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The WTI Crude Oil market rallied significantly during the trading session on Wednesday as we are now approaching the 200-Day EMA. The 200-Day EMA is sitting just above and now could offer a bit of resistance. The $95 level will be resistant, with the 50-Day EMA sitting just above there. There are a lot of questions when it comes to crude oil right now, so does make a certain amount of sense that we should see noise.

If the 50-Day EMA breaks down below the 200-Day EMA, then we have the “death cross.” This is a longer-term negative signal and could have some algorithms starting to sell. Furthermore, we have a lot of fundamental questions, not the least of which we whether not the Iranians are able to produce and sell crude oil into the markets. If that’s the case, and I do think that eventually ends up being the situation, that will flood the market with supply.

On the other hand, Saudi Arabia is now talking about cutting, so it’ll be interesting to see how this all plays out because they are complaining about the paper market not representing the physical market. At this point, the market is trying to break out and break higher from a rising wedge, but I think $100 is about as good as it gets to the upside.

Market Noise Ahead

• If we turn around and break down below the $90 level, then it is likely that the market could go much lower. At that point, we could see the market go down to the $80 level.
• The $80 level is an area where we should see quite a bit of interest, and a lot of longer-term analysts are starting to think that’s the target.
• Regardless, I think what we are going to see is a lot of noisy and choppy behavior, and therefore it’s likely that you need to think more or less of short-term trading more than anything else.

Keep an eye on the overall attitude of risk appetite as well, because if risk appetite is strong, then oil should do well. On the other hand, if risk appetite starts to pull apart, that could be negative for oil. A lot of this comes down to what central banks are doing as well, because if they raise rates drastically, that could drive down industrial demand.

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The NASDAQ 100 has fallen hard during the trading session on Friday and has broken down below the 200-Day EMA. The market is going to continue to see noise around the 13,500 level. The market pulling back the way it has suggests that perhaps we have a little bit of negativity ahead of us. The 13,000 level underneath would be a potential support level, as it was a previous resistance barrier. A certain amount of “market memory” is going to continue to be a major factor there. Furthermore, we also have the 50-Day EMA reaching towards that area as well.

If we were to break down below the 50 Day EMA, then it’s likely that the market could go down to the 12,000 level. The 12,000 level would have a certain amount of support from a psychological standpoint, and an area where we had bounced from. If we can break down below the 12,000 level, then it’s likely that we are going to go down to the 11,000 level. The 11,000 level was a major scene of support and any move below that level could open up a firestorm of selling.

What will be for the week ahead?

We have been rallying for a while, and now that we have challenged this area and failed, it’ll be interesting to see how next week plays out, due to the fact that central bankers are going to be speaking at the Jackson Hole Symposium and talking about inflation. After all, inflation is roaring around the world, and central bankers are going to have to do something to address this. In other words, they will more likely than not continue to pound on the idea of raising interest rates, and if that’s going to be the case that works against the NASDAQ 100 quite stringently.

• This next week is going to be very noisy, and today probably will be a continuation of the pullback.
• If we do rally, it’s not until we get through this coming week that I would be comfortable going long unless, we make a fresh, new high, after some type of litany of speeches in Wyoming that could be looked through.
• I don’t necessarily think that the situation is going to continue to see a “whistle past the graveyard” type of move.

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If we were to break down below the bottom of the candlestick, it’s likely that the €6400 level will be targeted.

The Parisian index had a picture-perfect pullback from the 200 Day EMA during the session on Wednesday, making for a classic technical analysis pullback. The Parisian index has been a bit overdone for a while, so it’s not a huge surprise to see that we are starting to see a little bit of hesitation. After all, the European Union has a whole litany of problems coming its way, and therefore it’s a bit difficult to get bullish.

Recently, the big bull argument has been low yields that are dropping, and then the fact that economic indicators are pointing to a slowdown, meaning that the ECB will have to be loose with monetary policy. This is the same nonsense that New York has been doing for a while, as the idea is about liquidity and not actual economic growth. I recognize that there is a bit of a threat that we could continue to go higher based on “bad news.” However, it’s a little bit different this time in the European Union since the economy is probably going to get pummeled this winter.

CAC 40 Forecast

The size of the candlestick does suggest there might be a little bit of follow-through, and it’s probably worth noting that the Jackson Hole Symposium is next week, and a lot of people will be paying close attention to what central banks have to say.

• This is a market that I think continues to see the central bankers out there as the main impediment to higher prices, so people will be paying close attention to Christine Lagarde.
• Unless the ECB is willing to step in and save Europe from its almost certain recession, stocks will take a huge beating.
• There are a lot of energy concerns for the European Union, and France cannot get away from that.

Ultimately, we are overdone anyway, so if we were to break down below the bottom of the candlestick, it’s likely that the €6400 level will be targeted. If we break it down below there, then the 200 Day EMA is near the €5200 level.

On the other hand, if we were to break above the 200 Day EMA, then it could open up a move to the €6800 level. Obviously, that would take quite a bit of effort at this point, but it is a situation you need to be aware of.

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You should keep in mind that the stock market is about monetary flow these days and not so much about fundamentals.

• The S&P 500 Index rallied a bit on Tuesday as we continue to see a lot of volatility and upward momentum.
• The market is going to have a serious look at the 200-day EMA, which is an area that does tend to attract a certain amount of attention.
• If we can break above the 200-day EMA on a daily close, that is the very definition of an uptrend for some traders, so it is worth paying close attention to.

On the other hand, if we break down from here, then it could be the end of the uptrend, especially as we are hanging around the crucial 4300 level on the E-mini contract. That would obviously attract a lot of attention in and of itself, so it’s worth paying close attention. If we do break above the top of the candlestick for the trading session on Tuesday, then I think the market is going to continue to “melt-up.”

It’s All About Monetary Flow

There are a lot of reasons to think that stock markets will probably drop, but quite frankly fundamentals don’t matter anymore. You should keep in mind that the stock market is about monetary flow these days and not so much about fundamentals. Because of this, it comes down to the bond market and what people believe the Federal Reserve is going to do. At this point, it looks very much like the market is going to continue to see the Federal Reserve as being relatively dovish, and that suggests that equities should continue to go higher.

If we do break down from here, then it’s likely that we will go looking to the 4200 level for significant support. Breaking down below there could kick off even more selling pressure, but right now it doesn’t seem very easy to make that happen. That being said, the market is also going to have to pay close attention to risk appetite on the whole, because there is a huge correlation between all markets at this point.

If we do break above the top of the candlestick for the session on Tuesday, it’s very possible that we may be talking about a 4500 print before it’s all said and done. That’s an area where I would expect to see a lot of psychological resistance.

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If we turn around and break down below the bottom of the candlestick from Thursday, I’m not going to hesitate to buy the US dollar, but I would not necessarily do it here.

• The AUD/USD currency pair rallied a bit Friday as we continue to climb ever so slightly.
• This is an interesting candlestick and move during the day because we had formed such a massive shooting star from the Thursday session.
• At this point, the market looks as if it is stalling a bit, but it is rather impressive given the fact that the US dollar has strengthened so much against other currencies.

Resistance at 200-Day EMA

Looking at this chart, the 200-day EMA sits just above, and that could offer a little bit of resistance. The 0.72 level above there opens up the possibility of resistance as well, and it’s likely that we will see sellers come back into this market before it’s all said and done. That being said, it comes down to the bond markets and whether or not traders believe that the Federal Reserve is going to continue to tighten. It’s interesting that they don’t, because it shows just how much the credibility of the Fed has been destroyed.

The Australians are more likely than not going to tighten a bit as well, but they also have the added concerns about China slowing down. The market is highly sensitive to the Chinese economy, due to the fact that the Australians are the biggest supplier of copper and other metals to the Chinese. That being said, the market is likely to continue to see noisy behavior, and although the Aussie has been a bit of an outlier when it comes to fighting the strength of the greenback, it does not necessarily mean that I want to jump in and start buying it.

If we turn around and break down below the bottom of the candlestick from Thursday, I’m not going to hesitate to buy the US dollar, but I would not necessarily do it here. I think we would probably see the euro and the British pound fall much further, so I am more or less going to use this market right now as an indicator. However, I would also point out that if we broke above the 0.72 level, then it’s likely that we go much higher. At that point, it would be a very strong turn of events. The last couple of candlesticks have been relentless, and if you believe in the bullish flag, there is the possibility that we could go all the way to the 0.74 level.

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The fight over the next week or so could determine where the Aussie goes longer-term.

• The AUD/USD currency pair has rallied significantly again during the training session on Thursday to reach the 200 Day EMA.
• The 200-Day EMA is offering a bit of dynamic resistance, and at this point, it’ll be interesting to see how Friday turns out.
• We have seen a major move higher by the Aussie dollar, but it will be the follow-through and what happens heading into the weekend that will truly give us a bit of an idea as to where we are going.

If we break above the 200-Day EMA, then it’s likely that we could look to the 0.73 level. The 0.73 level being broken to the upside could be a bit of a trend change, but right now I think that we have a battle setting up in the bond market that is going to continue to cause a lot of volatility. Bond markets continue to set up the next trade, and right now it’s worth noting that interest rates have dropped, but if they turn around and rally in the United States, that will send this pair lower.

The interest rates falling could send this market much higher, perhaps ready to head into a bullish move. That being said, the market is likely to continue to see a lot of volatility regardless, and if we did break above there, it could send the Aussie dollar looking to the 0.78 level. This could also be influenced by the commodity markets, and maybe even gold. Regardless, I think the fight over the next week or so could determine where the Aussie goes longer-term.

Another thing to worry about at this point is going to be the bank runs that we see in China, and therefore any damage to the mainland Chinese economy. If that economy starts to fail, it will have a huge influence on the Australian dollar and could send this currency much lower. In general, although this pair has been very bullish, it’s worth noting that the rest of the major currencies aren’t necessarily as strong against the greenback, so you will have to be very cognizant of the fact that typically all markets come back to correlations again. In other words, although the Australian dollar is probably the strongest currency right now against the US dollar, it’s not necessarily something that I am willing to jump in right away.

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I think we will continue to see a lot of noisy behavior more than anything else so short-term trading probably is the best way to go.

• The West Texas Intermediate Crude Oil market broke through 200-day EMA Monday, showing further signs of weakness.
• Because of this, the market is likely to continue seeing a bit of downward pressure, but whether or not we break down is a completely different question altogether.
• The $90 level underneath I believe is crucial, so we need to pay close attention to it. Breaking down below that level could open up the floodgates.

Fade Short-Term Rallies

The size of the candlestick is somewhat notable, as we have seen a pretty significant selloff, losing almost 5% during the day. Rallies at this point still look to be very suspicious at best, so I look at this as a “fade the short term rally” type of market. This is unless, of course, we get some type of shift in the attitude of the market. Until that’s the case, it’s likely that we will continue to see a lot of downward pressure, and it may only be a matter of time before the recession is going to causes traders to focus more on a lack of demand.

Because of this, it’s likely that we will continue to see a lot of trouble to get above the $100 level. That being said, if we were to break above the $100 level you would have to recognize that is the first serious shot across the bow for the bears. I don’t think that’s going to be the case though because we continue to see a lot of trouble out there. I believe that it is only a matter of time before we break down. If we break down below the $90 level, then it’s possible that we could go to the $80 level underneath.

On the other hand, if we were to break above the candlestick from Friday, that gets this market to the $105 level above. At this point, the 50-day EMA is starting to raise down to it, so that could set up for a nice fight. There is concern out there about the lack of demand but at the same time, there are also concerns about supply. In other words, I think we will continue to see a lot of noisy behavior more than anything else so short-term trading probably is the best way to go.

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I’d be looking to fade short-term rallies, but I would not get married to any position.

The West Texas Intermediate Crude Oil market has been somewhat tight Wednesday as we continue to see the oil markets worry about multiple issues at the same time. Because of this, I anticipate that we will have a lot of back and forth, probably very choppy action as we try to sort the future direction out.

The 200-day EMA is sitting just below and rising, so it does make a certain amount of sense that we would continue to see it show a bit of dynamic support. The market has been grinding higher over the longer term, but the reality is that this market has recently seen a lot of negativity enter. The 200 day EMA is starting to flat now, so the question now is whether or not the trend is trying to change. The 50 Day EMA is just below the $110 level and dropping.

Another thing that you have to pay close attention to above is the $100 level, as it should offer dynamic and psychological resistance. The noisy and choppy behavior can probably be written off as the idea of a recession coming and of course the possibility of supply issues at the same time. Demand should drive, but at the same time, there are questions as to whether or not supply can keep up. The market is likely to see a lot of significant pressure in both directions, so it’s likely that we would see the most obvious trade as more of a “fade the rally” type situation on short-term charts. In other words, I’d be looking to fade short-term rallies, but I would not get married to any position.

If we break down below the $90 level, that would be a collapse of the market, but I don’t see that happening easily. That being said, if we did see that happen, the market could drop down to the $80 level. Do not forget the US dollar component to this as well, because of the US dollar search the strength and quite drastically, that in and of itself could put a bit of downward pressure here. Either way, it’s not until we break above the $105 level that I would consider going long, and even then, I’d feel better once we recovered the previous uptrend line.

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