WTIC- short-term downtrend formed

The anticipated correction in WTIC does not fit into a pattern (such as triangle, flag or pennant), nor does it trade sideway like it did in March & April. In fact, one can clearly see that a short-term downtrend has formed, with lower "highs" (H1, H2 & H3) and lower "lows" (L1 & L2). A trend once started will run its course. It has broken below the 50-day SMA (presently at USD66-67) & the immediate uptrend line (presently at USD68). The next support may come from the 100-day SMA support at USD59-60 or the horizontal line support of USD55.


Chart 1: WTIC's daily chart as at 30/7/2009 (Source: Stockcharts.com)

The recent rally (from L2 to H3) was cut short when the Energy Department announced on Wednesday that inventories surged by 5.15 million barrels in the week ended July 24. This represents the biggest weekly increase since April.

The recent correction in WTIC may also be a reaction to the rebound in USD. From Chart 2 below, we can see that USD rebounded off its strong horizontal line support of 78. The rebound in USD is likely to be short-lived as the 50-day & 100-day SMA are clearly pointing lower. Even the USD's 200-day SMA is beginning to curve downward- warning of further weakness for the greenback.


Chart 2: USD's daily chart as at 30/7/2009 (Source: Stockcharts.com)

The current weakness in the prices of crude oil- supposedly driven by weak demand- just doesn't sit well with the idea that a global economy on the mend. To set your head spinning, Clusterstock had posted these two sharply conflicting articles on July 29th- "You Fools Don't Get It: This Is A V-Shaped Recovery!" & "Trader: Get Ready For A $10-$15 Drop In Oil!" Imagine... some people thought reading charts or tea leaves is easy!!!