Source: VantagePoint Intermarket Analysis Software

One area that hasn’t gotten a lot of hot market consideration lately is crude oil and related energy markets. But crude oil futures prices have rallied more than 40% in the last month and have reached a price level that may provide tough resistance.

  • VantagePoint’s medium-term moving average crossover (red circle) caught the turn to the upside after oil futures dropped below $33 a barrel, a far cry from the $147 highs of last July.
  • The predicted medium-term moving average (blue line) remains above the actual medium-term moving average (black line), and the predicted neural index is currently at 1.00, clues that the uptrend is still intact and must be respected.
  • But this looks like a time for caution on several chart fronts: (1) Crude oil futures prices have moved into the vicinity of previous highs (top dashed red line), (2) despite the uptrend, the predicted difference lines are heading generally lower (purple circle), a sign of weaker momentum, and (3) the current trend may be long enough to be ripe for a change, which could come quickly as recent oil prices tend to have extreme daily bounces, especially on stocks report days.
  • And fundamentals also seem to favor the bears: (1) OPEC has indicated it will maintain its current quotas, keeping supply adequate, and (2) economies worldwide haven’t shown many signs yet of coming out of their slump, which would increase demand.
  • Bottom line: It’s not time to abandon the bullish ship yet, but cautious traders may want to use VantagePoint indicators like the predicted low to catch a shift in direction or to implement options selling strategies in case prices drift sideways.
  • U.S. light crude for April delivery ended the day Monday up $1.81 to settle at $49.16 a barrel in New York, the highest settle price since Dec. 1, 2008. 
  • Many oil traders look at the stock market as a proxy for the overall economy and an indicator of future oil demand. As a result, oil prices often rise when stocks rally.

To see more FREE recent market predictions for energies go here!