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Still No New Signals On WTI

Headlines and Open Positions:
There is very little in the way of news headlines to directly impact WTI (102.05) crude oil valuations at this time ahead of the weekly US oil inventories that will be released on Thursday. Price action continues the choppy and overlapping trading pattern that has found support, and is unable to break resistance. The potential for new trade signals to form today is weak, and a reversal to support on WTI at 101.50 is likely.

Trade desk updates sent a trade signal to clients last week to buy from 99.65 on West Texas Intermediate (NYSE:WTI) (100.15), targeting 101.00, which has completed its cycle and should now be closed.

The outlook for USO (40.50), the exchange traded fund (ETF) that tracks oil momentum, is to consolidate above 37.50, to struggle to easily break 41.00 resistance, and to continue to lag behind the main moves seen in WTI futures contract trade.

Expectancy is for consolidation in crude prices in the near-term. Any existing oil positions should be closely monitored while recent price action is absorbed. USO may struggle to offer a fair reflection of the choppy 24-hour moves currently being seen in crude oil futures trade.

Alternate Trade:

Investors who do not want to wait for their regional cash market to open, or do not have 24-hour access to the market they have open positions in, are able to access the 24-hour currency market. There is potential to analyze and trade currencies in a high-volume market that is supported by the global inter-bank system.

Investors can trade currencies in-line with a rising global market, or trade ahead of a falling cash market open. Being able to use currencies offers the opportunity to be in a trade before the regional market opens.

Traders could trade the currency pair EUR/USD in-line with the potential seen in global equity and commodity movement. Buying the US dollar and selling the euro is a simple process of placing a sell order on EUR/USD, and then closing that same position in a similar way that equity trades would be bought and sold.

If global market trade favors the selling of WTI below 101.50 a potential trade signal will be issued on EUR/USD. Selling the EUR and buying the USD via this currency pair from 1.4360 draws in 1.4340 and 1.4270.

Oil Price Action:
Strong buying activity was seen at 97.00 on WTI in April and May. This potential price reversal and swing point area found buyers recently, and will now be closely monitored as an area of strong support to buy the dips from. Market alerts will be sent to subscribers as sustainable momentum builds.

Main WTI support: 97.50. Main WTI resistance: 102.50.

ETF Price Action:
Strong buying activity was seen at 42.00 on USO in April and May. This potential price reversal swing point area will be closely monitored. Upside resistance will now be very strong, and a reversal lower from this area looks very likely.

Main USO support: 36.50. Main USO resistance: 42.50.

Technical Correlations:
WTI 100-day Simple Moving Average (NYSE:SMA) is at 99.40. WTI has a 36-month 75% correlation to S&P moves, and a 90% correlation to the euro (Eur/Usd) currency pair.

Daily trading range on WTI is $3.80, which is way above the historical norm and indicates increasing speculative interest, and increased volatility to come.

Outlook:
No trade signals are forming as the sideways chop continues ahead of US oil inventory reports and Non-farm payroll numbers this week.  Clients will be notified when price action confirms further upside potential.

Sentiment towards WTI trade is mixed after recent tests of support held, but strong upside resistance was not able to be easily broken. Price action favors consolidation of recent moves in the near-term. Traders committing to oil trades at these levels need to reduce trade size, as volatile intra-day trading patterns are likely to continue for a while.