Energy prices were sharply lower Wednesday following a train of weakening economic growth. It was revealed in the wee hours of the morning that New Zealand was concerned about their export market with the Central Banks of the world in a rush to devalue their fiat. Australia also noted that commodity exports were soft since the Chinese slowing. The oil bulls had built their positions based on stimulus and a strengthening Chinese economy. The funds moved the market to 100.00 and they moved it down below 88.00 Wednesday. They are beginning to see the slowdown in Europe and in China and less demand in the U.S. fundamentals are shifting. The EIA inventories were actually mildly supportive in the Dist had a 3.7 mb draw and WTI was -500 kb when a build was expected. Nevertheless, WTI was down over 4% Wednesday. This was on the back of margin selling and long liquidation from the funds. Exacerbating the declines in WTI was the huge dump in rbob over the past four sessions. From its October expiration high the continuation chart is down over seventy-cents. Of course the HFT’s only aided in the drubbing of the bulls.
However, the troubles in the Middle East are not going away even though attention has been drawn away from the conflicts. The Iranian government is in panic mode over the devaluation of the Rial. That has fallen 70% in the last week. The government there is trying to “persuade” the black market not to trade the currency. Of course that will happen. In an effort to deflect some of the heat being felt there, Syria, the Iranian ally, fired tanks across the border into Turkey. The U.S. marked its outrage at the skirmish. Turkey answered in less diplomatic terms by firing back across the border late in the day. A market that does not respond to bullish news by definition bearish. There is probably more downside to come before a significant rally occurs. By significant we mean $2.00 to $3.00.
Daily Moving Averages: 21, 55, & 100: 93.99, 93.30, 89.98
Weekly Moving Averages: 21, 55, & 100: 90.51, 95.08, 94.78
November was pressured from the start of the New York session after getting poor economic figures from China.
- Under the weight of margin liquidation Nov fell over 4% Wednesday.
- There is likely to be more downside to come for Thursday. Nov will have minor resistance at the 88.55 to 88.65 zone. The minor upside pivot is 88.70.
- The key upside pivot to the intraday chart is 89.50.
- We are looking to sell the rally at the 88.50 area with a stop loss above 88.70.
- Nov has little in the way of strong support until it reaches the 87.00 to 86.85 region. We look for this level to provide a bounce point. The upside pivot that will confirm a short term bottom will be a move above 88.70.
- If elected on the trade recommendation we will be looking to cover at the 87.25 level.