By FXEmpire.com
The Light Sweet Crude market fell during the session on Friday as the “risk off” trade came back. The fears of the issues in the European Union remain high, and the unknown is something that has the market selling first and asking questions later. The oil markets tend to have the appearance of a barometer for risk often, and this point in time is certainly in this category. The oil markets have been testing the $95 level over the last several sessions, and although it has held so far, it looks like the bears are definitely out in full force.
The level has been the site of massive support, and we use it as a line in the sand. As long as we are above the $95 level, we feel that buying is the only way to go going forward. However, if the level gets broken and closed below on the daily chart, we would have to change our thoughts about this market. The oil markets are currently one of our most favored indicators for the overall economy, and the fact that it has fallen so hard really puts an exclamation point on the fact that the markets are so worried about the overall health of the global economy.
The market is currently struggling, and as a result we suspect that a breakdown could be coming, but the level has held up so far. The fact is that the markets are currently sitting on a cliff, and although we are still in the “buy zone”, we need to see a move higher in order to feel comfortable going long. As for selling, the level needs to be broken through and closed below in order for us to think that the market is ready to fall.
The $102 level above should continue to acts as resistance going forward, and with the weakness we have seen recently, we are going to take profits just below that mark as the extreme bearishness suggests struggles ahead, even if we bounce. This of course assumes that we get the move higher, but if we don’t – we would be ready to sell and hold for some time as it would be a bit of a capitulation.
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Originally posted here
