Peaks and Troughs Progression
Light sweet crude oil formed a lower minor low and a lower minor high. The intermediate trend is towards lower prices.
Moving Averages
Crude oil is trading near the flattening 9 and 18-day simple moving averages: the short-term trend is towards sideways prices, and the signal is reliable. The commodity is trading below the declining 50-day simple moving average: the intermediate trend is towards lower prices, and the signal is reliable. Crude is trading near the middle Bollinger band after bouncing off of the upper band.
Momentum Indicators
The 12-day rate of change is declining and below equilibrium: the price is lower than it was 12 days ago and the difference is increasing. The 14-day slow stochastic indictor is near equilibrium. The 14-day RSI is near equilibrium and is suggesting crude oil is in a bear market.
Investor Sentiment
The non-commercial traders were net long 224,402 contracts of light sweet crude oil on November 12, 2012. The number of longs declined by 8,562 contracts and the number of shorts increased by 493 contracts compared to the prior week's reading. Investors are becoming more bearish on crude oil.
Crude Oil Inventories
Crude oil inventories decreased by 2.9 million barrels from the previous week, according to the EIA report released Wednesday. U.S. crude oil inventories remain above the upper limit of the average range for this time of year. Last week, inventories increased 1.1 million barrels.
The elevated level of inventories should weigh on the price of crude oil in the coming weeks.
Conclusion: Neutral
The fundamentals of the crude oil market are reflecting tepid economic growth as inventories are above the upper limit of the average range for this time of year. Further, the IEA cut the demand forecast. The market action in crude oil is reflecting the weak fundamentals. Also, fundamentals may get weaker in the weeks to come. That said, traders should be short the market and investors out of the market.
By. Chris Grosvenor
Chris earned the Chartered Market Technician designation. He is earning the Chartered Financial Analyst designation and graduated with honors in Economics. Also, he has managed… More