Market Gives Up Early Gains

I would anticipate that the next several sessions should be rather volatile, as a lot of longer-term traders are starting to jockey for position on the next big move.

The West Texas Intermediate Crude Oil market was all over the place on Tuesday as we shot higher, but gave back quite a bit of the gain. The candlestick for the session looks as if it is going to print a shooting star, suggesting that we are going to continue to pressure the downside again. This is interesting, as we have such significant support underneath that will continue to be tested.

While the crude oil markets have gotten a bit of a boost due to the commodity shot, there are a lot of concerns now about whether or not there will be enough growth to lift the demand long term. The global economy slowing down will be very poor for the pricing of crude oil, and now it appears that the area just below will continue to be interesting.

The 50-day EMA sits just below at the $99.18 level, and we also have an uptrend line that hangs out in the same area. Because of this, I think it is very likely that there will be buyers underneath, but if we break through all of that, it could be the beginning of something bigger. At that point, I would anticipate that the $95 level would be targeted, and then perhaps the $90 level after that. The crude oil market is very sensitive to the situation with Russian supply coming off-line, but there is also the concern about the economy slowing down enough to cause serious demand destruction.

After all, the “best solution to high prices will be higher prices.” When a commodity it is too expensive, the demand drops quite precipitously, and therefore so does the price, at least until demand catches back up. Alternately, if we were to break above the top of the candlestick for the session on Tuesday, that allows the market to go looking toward $109 above, and then the $115 level after that. The crude oil market certainly looks threatened at the moment, but it is still technically in an uptrend as we have not sliced through that trendline. That being said, I would anticipate that the next several sessions should be rather volatile, as a lot of longer-term traders are starting to jockey for position on the next big move.