On Thursday, the overall situation in crude oil hasn’t changed much as the commodity wavered around the January peak. Will the relationship between black gold and the general market give us more clues about future moves?
Crude Oil’s Technical Picture
Let’s examine the technical picture of the commodity (charts courtesy of http://stockcharts.com).
From today’s point of view, we see that yesterday session didn’t add anything new to the short-term picture of crude oil. As you see, the commodity re-tested once again the January high, but then rebounded slightly – similarly to what we saw a day earlier.
The size of volume was disappointing (we haven’t seen such low volume since mid-September), which may suggests some uncertainty about the direction of the next bigger move. Nevertheless, taking into account the fact that oil bears had some problems with the successful breakdown under the January peak, it seems that their opponents could try to push crude oil higher in the coming day(s).
If they manage to do it, we may see an increase even to $56.41 (the lower border of the blue consolidation) or $56.85, where the previously-broken upper border of the black rising trend channel currently is. Will such increase change anything in the short term? Not really, because we saw similar rebounds in the past, which usually were nothing more than verifications of the earlier breakdowns.
Therefore, in our opinion, as long as there is no invalidation of the breakdown under the black resistance line, lower prices of light crude are more likely than not – especially when we factor in the Tuesday price action (an invalidation of the earlier breakout), the sell signals generated by the indicators and what we wrote on Wednesday about the current situation in the oil-to-gold ratio (if you haven’t had the chance to read that alert, we encourage you to do so today).
And speaking about the ratio… in recent days you could read about the relationship between crude oil and gold. Today, we decided to go one step further and examine the connection between light crude and the general stock market.