September crude oil futures continued to soar this week, proving that last week’s huge rally was no fluke. The market spiked up early in the week before running into fresh selling pressure slightly above the March 2012 top at $106.35. The actual high for the week was $106.53. The subsequent sell-off is not indicative of an impending change in trend, but could be signaling overbought conditions.
So far the initial reaction from the top should be judged as mild, however, a close for the week under $103.05 would be indicative of more serious selling pressure. If this occurs then look for selling pressure to trigger a minimum move to $99.57 over the near-term. Since the main trend is up on the weekly chart, a correction back into this price could draw the attention of buyers if the fundamentals remain the same.
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Fundamentally, the initial thrust to the upside this week was fueled by political unrest in Egypt and signs of an improving economy. Speculation that the situation in Egypt will escalate and lead to disruptions in supply continued to underpin the market at the start of the week. Additionally, last week’s latest U.S. Non-Farm Payrolls data served as a sign of an improving economy, leading to thoughts of increased demand.
This week the U.S. Energy Information Administration (EIA) supply and demand report helped give prices a boost when it revealed a decline of more than 10 million barrels for the week ended June…