Last Monday’s issue of The Schork Reporthighlighted telltales that seemed to suggest that the crude oil markets in London and New York were gearing up for an upside breakout.
Specifically, we noted the relatively rapid shift on the Nymex from a steep 9.6% deficit to the 200-day moving average to a slight 0.4% premium. This rally was accompanied by a 12 point drop in volatility, an event that indicated confidence in the price path.
Then in Monday’s (6/21st) session the penultimate July contract broke through (but failed to close above) the 62% retracement, 78.40. The market then moved lower with rising vol through Thursday before Friday’s sharp 3.1% spike.
Thus the conundrum; was last week’s initial weakness a sign that bears were wresting control or was it merely a respite for the bulls to reload?
In this vein, Friday’s close above the 62% retracement bodes well for the bulls.
That said … with a storm (Alex) on the cusp of the GoM, perhaps the bears got caught in a bit of a squeeze going into the weekend.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.