This is a market that I think continues to be very noisy, but we certainly have seen a major “shot across the bow” for the overall uptrend.
At this point, any type of significant momentum has been taken out of the market, and if we were to recover, it would take quite some time.
Pay Attention to Previous Uptrend Line
The previous uptrend line sits just above, and I think you need to pay close attention to it, as there should be a certain amount of “market memory” in the commodity, and I think that we could see sellers in that general vicinity. This is just below the $105 level, which is an area that continues to see a lot of interest based on the previous action, so if we do rally from here, I think the likelihood is that we could be short in that area.
If we break down below the $95 level, then it suggests that we could go to the $90 level underneath. The $95 level also suggests support due to the fact that the 200-day EMA sits right there. If we break down below there, then I think a lot of CTA traders will be forced to get short of this market, as it will have entered a negative trend. At that point, we would go much lower.
That being said, the market is likely to see a lot of concerns when it comes to the idea of a recession, but it should be noted that the market turning around the way it had late in the day on Wednesday is a very strong sign. However, that does not mean that we are done selling off. It is a huge argument between the idea of a recession crushing demand and the fact that we have not drilled much for the last couple of years, and we have to worry about supply. This is a market that I think continues to be very noisy, but we certainly have seen a major “shot across the bow” for the overall uptrend.