Navigating the Oil Market’s Rough Seas: WTI Crude’s Bearish Outlook By Lewis William, Senior Financial Analyst, Triangle Profits
November 15, 2023
The crude oil market has recently been a whirlwind of activity, with WTI Crude Oil demonstrating significant volatility. As an expert in the field, I find it imperative to dissect these movements to provide our readers with a clear understanding of the current market dynamics.
The Bearish Bias: Technical and Economic Underpinnings
WTI Crude Oil has experienced a rebound after a substantial selloff, breaking below the critical support level of $83. Despite this bounce back, the market’s bias remains strongly bearish. The interplay of weakening economic data and technical indicators suggests further downside potential. Particularly concerning is the performance of the U.S. economy, a global growth leader, where indicators like the ISM Manufacturing PMI and the NFP report indicate a contraction, fuelling fears of a looming recession. This environment is far from conducive for a bullish oil market.
Daily Chart Analysis: The Downtrend and Potential Short Opportunities
On a daily timeframe, WTI Crude Oil’s recovery at the $75.00 level post-selloff has been noteworthy. However, a significant break below $77.70 has shifted the market structure to a downtrend. This change is further evidenced by moving averages crossing to the downside. Should the oil prices rise further, we might see selling opportunities, particularly at the intersection of the trendline, the red 21 moving average, and the 50% Fibonacci retracement level.
Short-Term Timeframe Observations: 4-Hour and 1-Hour Charts
The 4-hour chart reveals that sellers have been capitalizing on the minor trendline and the 50% Fibonacci level, gearing up for potential new lows. Conversely, buyers would need a price break above this trendline to pivot the market sentiment from bearish to bullish, targeting a break above the $83 resistance. On the 1-hour chart, a divergence with the MACD at the trendline signals weakening momentum, likely leading to further declines. A break below $77.70 could intensify bearish positions, pushing the market towards new lows.
Economic Data Outlook: US Retail Sales and Jobless Claims
Upcoming economic data, particularly from the U.S., will be critical in shaping the oil market’s path. Retail Sales and Producer Price Index (PPI) data are expected to significantly influence market sentiment. Additionally, the latest U.S. Jobless Claims figures will provide insights into the labour market’s condition. Strong data could offer short-term support to the market, while weak figures could exacerbate recessionary fears and weigh on Crude Oil prices.
In summary, the WTI Crude Oil market is navigating through choppy waters, with a bearish outlook underscored by technical and economic factors. As investors and analysts, staying abreast of these developments is crucial for informed decision-making in this volatile environment.
