In this article, we examine the significant daily order flow and market structure driving WTI price action.
19 September 2018:
As noted in Tuesday’s WTI Daily, the highest probability path for Wednesday’s auction based on market structure was for price discovery higher. Our first daily inference (69.10s holding as support) played out as balance developed during Globex around Tue’s settlement before a buy-side breakout developed ahead of and confirmed after the EIA release. Price discovery higher developed to 70.82s at/near Sharedata’s average daily range high target ahead of the NY close, settling at 70.77s.
Wednesday’s auction saw Globex balance around Tue’s settlement as key demand, 69.35s-69.20s, held into the NY open. Buying interest emerged early in NY, driving price higher to the Globex high, 69.95s. Initiative buying then entered, 70s, AHEAD of the EIA inventory release (-2mil v -2.7mil expected), driving price higher to 70.38s, into the EIA release. Two-sided trade developed post-EIA as pullbacks to the buy-side breakout area/key demand, 70s-69.95s, held. Buy-side order flow sequence resumed, driving price higher in range extension to 70.71s at both Sharedata’s average daily range high target and the NY auction average daily range expectancy (111 ticks).
Buyers trapped there as selling interest drove price lower in pullback to 70.15s. Buying interest emerged there, driving price higher in minor range extension to 70.82s ahead of the NY close, settling at 70.77s.
As noted earlier this week, last Friday’s support and the development of buying interest sequentially higher in Tuesday’s auction were structural indications of potential for price discovery higher. This week’s sell excess failed today as price discovery higher developed toward key supply overhead, 71s-71.26s. A structural unsecured high developed in today’s auction, 70.82s. Unsecured highs/lows are price extremes which lack excess (rejection). While these areas can hold, they are structurally weak and prone to either continuation within the prior trend or repair in the form of excess development. Looking ahead, the highest probability path for Thursday’s auction would be for price discovery higher barring the development of a structural sell excess.
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). Today’s development of price discovery higher has driven price to a key supply area, 71-71.25s. The larger response within this area will determine price discovery higher to major supply overhead, 72s-75s, or rotation back to key demand below, 65.75s-64.40s.
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.