By FXEmpire.com
The Light Sweet Crude market has come completely undone at this point. The last week was an acceleration of the bearish momentum that the oil markets have shown over the last month and a half. The market looks like it is racing towards the bottom that was put in at the $80 level, and one would have to think that there will certainly be a chance of a bounce from the area. However, the momentum has been so strong that you have to think there is something to the selling beyond a simple trade.
The market does look like it is ripe for a pop, but the truth is that a lot of things have changed over the last month or so. The “Iranian problems” have calmed down, and as such there will be a selling of the “Middle East premium” that was in this market. As the tensions between the West and Tehran heat up, this will drive the price of oil up. However, as this situation has calmed significantly, there has been as much as a $15 fear play taken out of the markets.
The fact that the global economy seems to be slowing down is certainly doing oil no favors at the moment either. The Chinese are slowing down, and this suggests that there is some kind of slowdown that is expanding at this point. Sure, everyone knows about Europe, but with the weak jobs number in America and the Chinese slowing down their industrial output, this doesn’t bode well for demand overall in the oil pits.
The $80 level should offer some kind of support. Because of this, we are more interested in selling on rallies than right here at this level. Quite frankly, the fall has been so strong and quick that the selling of this commodity at these levels is simply chasing the trade at this point. Because of this, we like selling rallies that show weakness on the daily charts, but could be convinced to go short on a break below and daily close sub-$80.
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Originally posted here
