The West Intermediate Crude Oil market has initially tried to rally during the trading session on Wednesday but gave back gains above the $85 level. Ultimately, this is a market that continues to see a lot of noisy behavior, but I think there is a lot of pressure since the global economy is almost certainly going to slow down.
The $82.50 level underneath offers a significant amount of short-term support, but I do think that it is probably going to get broken, and that we may drop down to the $80 level. The $80 level is a decent round figure that a lot of people will pay attention to. Rallies continue to get sold into, and we have already had the so-called “death cross.” Because of this, longer-term traders are starting to look at this through the prism of a downtrend, and I think it is probably only a matter of time before we break down completely.
Expecting Sideways Action
- Keep in mind that the Federal Reserve is going to slow down the economy as well, so this is a bit of a “double whammy” for crude oil, and anything close to being a risk asset.
- If we break down below the $80 level, then I think it’s likely that the bottom could fall out.
- More likely than not though, I think we probably have sideways action overall, and therefore I think short-term traders will continue to be attracted to this market.
If we were to turn around a break above the $90 level, that could offer more buying pressure because it would be such a huge breakout and of course a move of significant momentum. If we can break above the $90 level, then it’s likely that the momentum could carry this market to the $95 level. I don’t expect that, but you never know what could happen next because there has been so much volatility. After all, this is a market that is highly volatile most of the time, as it is the lifeblood of economic growth. You need to be cautious with your position sizing because this is a market that can move quite rapidly on news headlines. Ultimately, I’m looking to fade rallies or sell breakdowns, but I must keep an open mind.
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