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The light sweet crude markets had a very back-and-forth session for the third week in a row, and for the second week in a row printed a very neutral legged doji. The current area that the light sweet crude market is trading in is a bit of a cluster of support and resistance, so we believe that this market is still going to be sideways for a while. A break below the $94 level gets a selling this market on a longer-term basis, while the breaking of the $98 level looks positive and likely to head to the $100 level and then $105 level.
There is a lot of headline risk out there currently, and as such oil markets could be subject to shocks. Because of this, it is difficult to take a longer-term position in this market, but it should be noted that the candle from two weeks ago was a shooting star that was placed in an almost perfect position. It is because of this that we are starting to get more and more interested in selling this market if we can get below the aforementioned $94 level.
While the Federal Reserve looks likely to embark on more quantitative easing, this should keep a little bit of a bid in the oil markets. However, there is a serious lack of demand and that of course will continue to hamper price. Simply put, quantitative easing only goes so far.
The Middle East will continue to provide fireworks for this market, and the Iranian situation of course will have to be watched. However, this is nothing new to the markets and we could see a little bit of fatigue set in and see traders ignore the entire situation for the near term. If this happens, it's very likely that we will continue to fall as there is less of the "panic trade" in the marketplace.
We buy above $98, and sell below $94. In the meantime, we think this market will continue to bounce around and be more of a short-term trader’s market place.