In this article, we examine the significant daily order flow and market structure driving WTI price action.
10 September 2018:
As noted in Friday’s WTI Daily, Friday’s auction signaled a potential stopping point low development, 66.86s-67s, evident in the order flow and market structure. These structural developments implied potential for buy-side continuation toward key supply overhead (68.50s-69.50s).
Monday’s auction saw Globex buying interest from Friday’s settlement, 67.75s, drive price through Friday’s high into the London auction, achieving the Globex stopping point high, 68.52s, within key supply overhead. Buyers trapped there amidst responsive selling, developing balance, 68.52s-67.90s, into the NY open.
Rotation back to test the Globex high developed early in NY as selling interest emerged, 68.40s-68.49s, amidst large offer liquidity. This order flow data indicated sell-side defense of the high. Bids then pulled, resulting in price discovery lower to 67.66s, as a stop clearing probe of the Globex low saw sellers trap. Rotation higher then developed to 68.14s ahead of the London close. Selling interest emerged there, forming a sell excess, 68.14s-68.03s, before the bids pulled and price discovery lower developed, achieving the stopping point low, 67.33s. Buying interest emerged there, halting the sell-side auction, developing balance, 67.33s-67.68s, into the NY Close, settling at 67.54s.
Looking ahead, the market’s near-term buy-side phase that developed from last Thu-Fri’s support, encountered new selling interest, 68.43s-68.52s, in large size within the key supply overhead. Subsequently, rotation lower developed today to 67.33s. Consistent with the near-term sell-side bias (begun on 04th September), the market continues to see the market offered on rallies. Response to the micro-demand cluster, 67.40s-67s, will now be key into Tuesday’s auction. Failure of the buy-side to defend this area will imply potential for price discovery lower to key demand cluster below (65.75s-66.40s). Alternatively, failure of the sell-side to drive price lower through this key demand, will imply potential for price discovery higher to key supply clusters overhead (68.50s-69.50s/70.70s-71.40s).
As noted in last week’s WTI Weekly, seasonal price weakness in confluence with continued extreme bullish posture in the Managed Money suggests headwinds for WTI trading beyond the key supply cluster overhead (72s-75s). Near-term, the market structure (new selling interest at supply overhead) provides the empirical evidence indicating the sell-side bias remains until the key demand areas are challenged and new buying interest emerges there.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.