With everything that’s going on, I believe that crude oil market will continue to be very noisy and difficult to trade, so the only thing you can truly do is keep an eye in your position size.

The West Texas Intermediate Crude Oil market has gone back and forth during the day on Friday, showing signs of hesitation and confusion. It is worth noting that crude oil has a lot of different crosscurrents that it has to deal with right now, and therefore the confusion makes quite a bit of sense.

With your own pal stating that the Federal Reserve is going to be extraordinarily hawkish, it does make a certain amount of sense that we would see oil struggle in this type of environment. If the Federal Reserve slows down the economy, the demand for crude oil should drop. On the other hand, we have a situation where OPEC is talking about cutting output, and that should drive up prices if the supply/demand quotient gets shifted.

Market Awaits Noise

• The market recently had broken out of a “falling wedge”, so in theory, we should go higher.
• At this point, the market is likely to continue to see noisy behavior, but based upon the technical analysis, one would think that we should go looking to the $102 level.
• However, that doesn’t necessarily mean that it has to.

We also have to worry about whether or not the economy is going to be even remotely strong enough to push demand. The situation around the world is deteriorating, so it would make a certain amount of sense that there would be a severe lack of demand. Beyond that, we also have the Iranians possibly getting involved and producing a million barrels of oil for the markets if the nuclear deal gets agreed to. If that’s the case, then it’s obvious that the market would have to pay close attention to the potential oversupply of the markets. With everything that’s going on, I believe that crude oil market will continue to be very noisy and difficult to trade, so the only thing you can truly do is keep an eye in your position size. If we break above the 200 Day EMA and the 50 Day EMA, it suggests that we have further to go, but if we break down below the $90 level, we could break down rather rapidly as well. I think the only thing you can count on is a lot of chop and noisy behavior of the next several days.

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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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Short-term breakouts might lead to longer-term selloffs.

• The West Texas Intermediate Crude Oil market has fallen rather hard during the trading session on Monday but then turned around to show signs of life.
• The market ended up forming a bit of a hammer, and the hammer sits just above the $90 level.
• The downtrend line just above is part of a “falling wedge”, and therefore breaking above there could kick off a move to the upside.

If we were to break out to the upside, it’s likely that we will test the 200 Day EMA, which is the blue line on the chart, which is also being tested by the 50 Day EMA as we are slowly lower. At this point, I think that might be your first target, but I also recognize that scenario that could cause quite a bit of trouble. Signs of exhaustion in that area could be jumped on, but if we break above it, then one would have to assume that the market is going to go looking to the $100 level.

Demand causes concern

If we break down below the bottom of the hammer from the candlestick on Monday, then it should open up quite a bit of fresh selling, perhaps sending this market down to the $80 level after we break through the $85 level. Keep in mind that a lot of people are worried about the potential slow down globally, which of course would have a lot of negativity attached to the oil market as demand should drop. More likely than not, that will probably be an ongoing theme in this market, as signs of exhaustion will almost certainly be jumped on. If we do get those signs of exhaustion, it’s likely that the market then will jump on it and start shorting again.

If we were to break above the $100 level, then it’s likely that the market could change its overall attitude, perhaps opening up a move to the $110 level. I don’t expect to see that, but it is something worth paying close attention to, and therefore it’s something to keep in the back of your mind. All things being equal, this is a market that I think will continue to see more noise than anything else, but clearly, there is a serious concern out there when it comes to the overall demand. Short-term breakouts might lead to longer-term selloffs.

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The market is more likely than not going to have more of a “fade the rally” type of situation

The West Texas Intermediate Crude Oil market has gone back and forth during the trading session on Friday, as we continue to see a lot of confusion in financial markets overall. After all, oil is the lifeblood of the markets, so therefore it does make quite a bit of sense that we would see a neutral candlestick as there are so many questions.

• The $87 level underneath has been short-term support, while the $94 level above has been resistance.
• The 50 Day EMA is starting to drop at this point, and perhaps reach the 200 Day EMA.
• We are getting relatively close to a “death cross”, which is a very negative situation, and could send algorithmic traders to the downside.

The market has been drifting lower for a while, and now that we are hanging around this consolidation area, it is worth noting that you could make out a little bit of a falling wedge here, so we might get a bounce. Any rally at this point in time is probably short-lived though, perhaps allowing just a bit of a move toward the $100 level. 

Crude oil forecast for today

One thing that you need to keep in mind is that there is a lot of concern when it comes to global demand, as we are starting to see economies slow down. Furthermore, we also have to keep in mind that the US dollar has been strengthening, and that means it’ll take less of those dollars to buy oil, all things being equal. The market is more likely than not going to have more of a “fade the rally” type of situation, or perhaps just a breakdown below the recent support that allows oil to drop down to the $80 level over the next several weeks.

It’s not until we break above the $100 level on a daily chart that I would consider going long in this market, but I think it would take a significant amount of upward momentum and strength to get there. I just don’t see how that plays out, but you always have to have the other hypothesis in the back of your head, even if it goes against almost everything that you know or see. That being said, until we break above there, I’m looking at rallies as an opportunity to get short again.

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If we can break above the $100 level, I believe the market may turn around completely.

• The West Texas Intermediate Crude Oil market has bounced a bid from a major support level during the trading session on Thursday.
• We are now above the $91 level, which is a nice bounce, but it does not necessarily mean that the world has changed.
• If you have been following my analysis here at DailyForex, you know the move that I had hoped to see is some type of bounce that we can start selling.

Crude Oil Forming a Death Cross

We are at the top of the range for the candlestick, and it suggests that perhaps we probably have a little further to go to the upside. I like the idea of looking right around the $94 level for significant resistance, perhaps extending all the way to the $95 level. The $95 level obviously has a certain amount of psychology attached to it, and of course, we also have the 200 Day EMA hanging around in the same area, right along with the 50 Day EMA dropping down toward that area as well. In fact, we may be getting ready to form a “death cross.”

It should be noted that the “death cross” is when the 50 Day EMA crosses below the 200 Day EMA, signifying to longer-term traders that we are now in a very bearish downtrend.

I think at this point we probably have a situation where we continue to saw tooth on the way down, and this bounce is just the latest iteration of a bit of a bounce, and therefore I think it’s only a matter of time before the sellers come back in. It will be interesting to see how things play out going forward because everything has been so negative and of course, there’s also the possibility of the Iranians being able to pump oil into the market as well as we continue to see discussion around the Iranian nuclear deal.

One of the biggest drivers of prices going lower will be the strengthening US dollar and a lack of demand. The “reopening trade” seems to be over, so therefore it makes sense that oil demand will drop regardless. If we can break above the $100 level, I believe at that point the market may turn around completely, but until then I look at things as being suspicious to say the least.

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Rallies will more likely than not offer selling opportunities.

The West Texas Intermediate Crude Oil market has been very negative for a while, and it makes a certain amount of sense that we would see an attempt to turn things background. After all, the market won’t go in one direction forever, and it should be noted that quite a few crosswinds are blowing at the same time.

One of the big negatives out there is the fact that the world economy seems to be slowing down, therefore it should drive down the demand for crude oil. Even with the Russian supply being diverted, the reality is that the market is still trying to price in the fact that demand may fall off a cliff. If this is going to be the case, it’s obvious that the price needs to come back in. The question is whether or not the market has priced everything in so far. That remains to be seen, but we are clearly below the 200 Day EMA, and now below the $90 level.

Crude Oil Forecast

If we break down below the lows of the last couple of days, it’s very likely that this market could drop to the $80 level. Any rally now will struggle to continue going higher, at least not without the fundamentals changing. A bit of a rally from here does make a certain amount of sense though, because if no other reason than the fact that the market has been selling off for quite some time. Remember, markets never go in one direction forever, so it does make a certain amount of sense that we would see an attempt to recover. It looks as if oil is going to continue to struggle not only based on the potential lack of demand, but also the fact that the Iranians are apparently making concessions in order to sell in the global markets as well. If Iran starts to pump crude oil into the global supply chain, that obviously brings more supply and, thereby drives prices down.

• If we were to break above the $100 level, that could kick off the next bullish run in this market.
• It would take quite a bit of momentum shifting in order to make that a reality.
• Rallies will more likely than not offer selling opportunities.

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I am still looking at this through a prism of fading short-term rallies.

• The West Texas Intermediate Crude Oil market initially tried to rally on Tuesday but has also seen quite a bit of selling pressure.
• The market continues to be a scenario where we are looking at the possibility of a severe lack of demand.
• After all, if the global economy is going to continue to slow down, then it’s likely that we have further to go.

Will Iran Increase Supply?

Furthermore, the Europeans continue to give good signs that the Iranians may be able to come to the table and start selling more crude into the markets, and that of course will increase supply in a market that’s already starting to see a serious concern about being oversupplied. Whether or not that will last for the long term is a completely different question, but right now it’s a very negative type of market.

The $100 level above is a significant resistance barrier, and if we were to break above that level that it’s possible that we could go higher. If we do break above the $100 level, then it could open up a move all the way to the $120 level. That being said, it’s worth noting that the market is continuing to pay close attention to the down-trending channel, so that’s worth paying close attention to as well. That being said, we have plenty of reasons to be bearish, at least in the short term.

The $85 level would be a potential support level, but if we were to break down below there, then we could go down to the $80 level. The $80 level is a large, round, psychologically significant figure, and an area that will probably attract a lot of attention. That being said, I think the only thing that you can count on is that there’s going to be a lot of volatility, especially if there is a sudden shift in the situation coming out of Iran and the European Union. If they suddenly blow up the idea of a potential deal, that will take roughly 1 million barrels of potential supply out of the market each day. That obviously would be bullish for the price, but ultimately, I think it’s very unlikely that the global slowdown will continue to saturate the headline, so I am still looking at this through a prism of fading short-term rallies.

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I will be looking for signs of exhaustion to jump on.

• The West Texas Intermediate Crude Oil market has rallied a bit, but at this point, it looks to me as if we are heading close to a major resistance region.
• The 200 Day EMA sits just above, so a lot of people are going to be paying close attention to this area.
• As we head into the weekend, it will be interesting to see whether or not the market participants are going to be willing to hang on to crude oil over the weekend.

It’s possible that we go higher, perhaps reaching to the $100 level, but at this point, it’s likely that the 50 Day EMA is going to go even lower. The $104 level is where it sits right now, and I do think that we are running much lower. Any sign of exhaustion will more likely than not be jumped on, especially as there are concerns about the global economy, as a slowdown will almost certainly drive down the value of crude oil because demand will fall.

The size of the candlestick is nice, and it does suggest that we have a little further to go. However, it’s where we close at the end of the day on Friday that will tell us more of the story. Even if we do rally from here, it’s really not until we break above the 50 Day EMA that you can start talking about the positivity of the market, because, for the most part, we are still in a very negative trend and channel. The US dollar strengthening of course will work against the value of crude oil as well most of the time, so you can pay close attention to that correlation also.

What’s interesting is that the natural gas storage numbers during the day came out higher than anticipated, suggesting that perhaps demand for energy is dropping. Because of this, it’ll be interesting to see how this plays out, but in the short term, it looks like the oil market is willing to ignore that. Natural gas has been outrageously expensive over the last several months, so that was part of the reason perhaps why oil has fought its way back up, but I think it’s probably only a matter of time before the short-sellers come back. I will be looking for signs of exhaustion to jump on.

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This is a market that I am still bearish on, but I need to see a bit of a bounce before putting money to work.

• The West Texas Intermediate Crude Oil market pulled back initially on Wednesday to test the lows yet again.
• That being said, we have turned around to show signs of life, perhaps due to the idea of more risk-taking out there as the CPI numbers came out cooler than anticipated.
• The idea is that the Federal Reserve will not have to slow down the economy as much as one side, and that could lead to more demand for crude oil.

Rough Road Ahead

I’d be remiss if I did not push back on this idea, because quite frankly inflation is over three times what the Federal Reserve is comfortable with. In other words, although the CPI number was cooler than anticipated, the reality is that it is still far too high for the Federal Reserve to pivot. In other words, they are going to engineer a recession, although it doesn’t necessarily seem that they are going to have to try very hard as various indicators showed just how out of sync this economy is in the United States. As long as that’s going to be the case, then oil has a rough road ahead.

The 200-day EMA sits just above the $95 level, and I think that could offer quite a bit of resistance. I would be very interested in shorting this market on a negative candlestick, but we don’t have that set up yet, and I think at this point you need to look at this through the prism of a downtrend that has been in a nice channel for a while. We are simply in the middle of that channel, and I think at this point in time it’s very likely that we will continue to see sellers above. We don’t necessarily have that right now, but I think after a little bit of a bounce, it’s very likely that they will return, especially near the $95 level.

If we break down below the bottom of the candlestick for the trading session on Wednesday, that could open up quite a bit of selling pressure, sending the market down to the $85 level, possibly even the $80 level. Ultimately, this is a market that I am still bearish on, but I need to see a bit of a bounce before putting money to work.

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If we do get a rally from here, the first signs of exhaustion will more likely than not be a nice selling opportunity.

• The West Texas Intermediate Crude Oil market pulled back a bit on Tuesday after rallying.
• This shows just how noisy this market is, and it suggests that we are still going to struggle to go higher over the longer term.
• After all, this is a market that has been drifting for a while to the downside, and now it looks like we are continuing to see plenty of bearish pressure.

Dropping Demand Affects Oil Markets

The crude oil markets have been suffering at the hands of concern about recessionary concerns, and therefore demand dropping. After all, if global economies are going to start slowing down, then the demand for crude oil will drop. This is especially pertinent due to the fact that OPEC had very little to say when it came to increasing production, and prices still continued to drop.

The candlestick is a neutral candlestick, so it does suggest that we have a lot of confusion, so I think we are going to continue to be cautious about putting too much into the market at any moment. I believe that the 200-day EMA above could offer dynamic resistance, somewhere near the $26 level. If we were to break above the 200-day EMA, the market is likely to go looking to the $100 level after that. The $100 level has a lot of psychology attached to it, so I think you would see new sellers coming back into the marketplace.

On the other hand, if we were to break down below the $87 level, then it’s likely that the market will drop down to the $80 level. In general, I think it’s likely that we go down to the $80 level, especially if the Federal Reserve has to tighten its monetary policy due to massive amounts of inflation. The CPI figures coming out on Wednesday will almost certainly give us an idea as to whether or not the Federal Reserve has to tighten monetary policy, which of course will strengthen the US dollar overall. In general, I think that’s probably what we are going to be looking at over the next 24 hours. I do not have an interest in buying crude oil, and I think that if we do get a rally from here, the first signs of exhaustion will more likely than not be a nice selling opportunity.

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