The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheLFB-Forex) -- Crude oil markets are oversold in the near-term, and hitting main support areas that will be difficult to easily break. West Texas Intermediate (WTI) (94.00) has a neutral momentum read in the mid-term. The four-hour trends are holding their short-sided direction, which sets up a sell-the-test-of-resistance play from the next upside move towards 96.00 on WTI trade. The potential for new trade signals to form today is weak, after the recent explosive long and short intra-day moves that hit for 30-minute periods in the previous few sessions finally found support. The reversal through resistance at 100.00 on WTI has created a barrier of upside resistance that will be very hard to break. Now is not the time to be holding WTI positions for the long term.
Headlines:News wires are very quiet regarding crude oil valuations, ahead of the Wednesday U.S. Oil Inventory numbers and FOMC interest rate statement and press conference. Today is not the day to be looking for crude oil trades.
WTI Technical Outlook:
Where To Now For WTI?:
WTI Support and Resistance:Strong buying activity was seen at 97.00 on WTI in April and May, but now breached as support these areas will create huge upside resistance. Market alerts will be sent to subscribers as sustainable momentum builds. Main WTI support: 91.50. Main WTI resistance: 97.50.
USO Technical Outlook:The outlook for USO ( USO) (36.90), the exchange-traded fund (ETF) that tracks oil momentum, is for consolidation above 35.50, and to struggle to easily break (39.00) resistance. The ETF is likely to continue to lag behind the main moves seen in WTI futures contract trade, as major oil price action is taking place while the U.S. session is closed.
USO Support and Resistance:Any existing short-USO positions should be closely monitored while recent price action is absorbed. USO may struggle to offer a fair reflection of the choppy 24-hour moves currently being seen in crude oil futures trade, and the Weekly chart close may offer some clarity. Main USO support: 34.50. Main USO resistance: 38.50.
Global Correlations:WTI 200-day Simple Moving Average (SMA) is at 92.50. WTI has a 36-month 75% correlation to S&P moves, and a 90% correlation to the euro (Eur/Usd) currency pair. Daily trading range on WTI is $2.70, which is below the historical norm and indicates decreasing speculative interest, and increased volatility as support and resistance areas are tested.
Previous Signals:Last three months of potential WTI trade signals have generated eight trades, seven of which have completed, that covered 90 points of overall movement. Any misses have come on days that instant volatility hit the global markets in reaction to breaking news headlines. Most signals have been generated from 1-hour chart algorithms. Want to create a structure program of daily work?
Alternate 24-Hour Trade:Investors who do not want to wait for their regional cash market to open, or do not have 24-hour access to the market they have open positions in, are able to access the 24-hour currency market. There is potential to analyze and trade currencies in a high-volume market that is supported by the global inter-bank system. Investors can trade currencies in-line with a rising global market, or trade ahead of a falling cash market open. Being able to use currencies offers the opportunity to be in a trade before the regional market opens. Traders could trade the currency pair EUR/USD in-line with the potential seen in global crude oil movement. Buying or selling the US dollar against the euro is a simple process of placing a sell order on EUR/USD, and then closing that same position in a similar way that equity trades would be managed. However, a stronger trade signal in WTI would first need to be seen before looking for correlated forex trades.
Trade Desk Support:
- Foreign Exchange (Dollar Index, EUR, GBP, AUD, CHF, CAD, JPY)
- Equity indices and ETFs (SPY, DIA, GLD, SLV, USO)
- Commodities (Gold, Oil, and Silver)