It seems that WTI crude oil has ended its bull market and now it could begin a major downturn lasting for some months, or even years.
At least three main factors are in favour of this new bear market:
- Dollar is getting stronger and stronger, especially against euro and other currencies: normally this is a bearish signal for commodities, think about gold, silver and of course oil.
- Libya war is coming to an end: oil production could come back soon at normal levels.
- Recession is hurting the main developed countries: economic downturn could slow down the consumer spending, purchases and oil procurement will necessarily go down.
I think that in the long term oil could go even to its starting point, at 35 dollars: recession could be long and the commodities are always the first to go down, often before the stocks, as in this case.
In the middle term the daily chart of WTI crude oil could help us to set some near targets, in terms of time. You can notice that the oil is inside a bearish channel started on April 2011, before the bear stock markets began. At the break of 76 dollars the first target is at 71-70 dollars, at the base of a major former accumulation area (support). Then, the second target will be at about 63 dollars, near the lower part of the channel. This bearish movement should begin during the next weeks: stay tuned!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.