I finally have some time to come up for air here and commentate on what I've been seeing in the Crude Oil market. As I last spoke briefly, the "trash compactor" scenario ended up playing out. That just told me that the longer time frame sellers were still very active and once value caught up to price, we saw a violent drop through the congestion area we had been trading in.
The reason I say violent is the velocity in which the market breaks through a level which is fueled by stop market orders firing off. And we saw some incredible drops throughout that period. Since the time I last commented, we are lower by roughly $15/barrel. Very impressive to say the least.
This drop has brought on tremendous volatility which is appearing in many markets now. The S&P 500 has corrected just over 200 points (roughly 10%) from its high. The US dollar has some strength and has pushed above last year's high and hovering up there still. The CBOE Volatility Index (VIX) has broken higher. US Treasury bonds have spiked up higher but lost most of that going into the end of the week and many other commodities are continuing to see weakness.
These are indeed interesting times. Times in which traders and investors that are inexperienced see substantial draw-downs in their portfolios due to the increase in volatility. October has traditionally been tough on stocks and this time is no different.
Looking forward, I have not seen a change in this down trend in Crude Oil however there have been signs of settling the last two sessions. For one, we had a giant short covering rally yesterday that took the market up roughly $5/barrel. This move also took out the previous session's high which stopped the one time framing action that had been occurring since October 2nd. And today, we just spent time in yesterday's upper distribution area. Keep in mind that today was a roll day but certainly something to take note of in that the selling has slowed down for now.
Looking at next week, we could see further rotational balancing activity until value catches up to price again. There is of course, always the chance for the market to run higher and meet value. 85.90 was last year's low. There could be some interest at that level for sellers as well.
Here are some updated charts that I put up last time and what the market has done since.
Here's a snapshot of the weekly and monthly average true range. As you can see, we've broken above last year's extremes.
Here are some daily bar charts of the Bollinger Bands and EMAs. Both looking very bearish currently.
These charts are the quarterly and yearly VWAP. Very clear measured moves occurring here.
This weekly bar chart is showing all the levels were broke though before finding some support (for now) at the $80 level.
Last chart is a weekly bar chart as well of the longer term perspective of Crude Oil. We can see that we're still trading below last year's low. We can also see that the RSI is showing an oversold level. Keep in mind that the RSI can remain oversold for a long time so, no sure indication that we're going to see a change here but worth noting.
Hope these last few weeks have been lucrative for you!
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