Oil swung lower today on the surprise build up of US crude oil inventories that was unexpected. The market had priced in a drop of around -0.65M barrels, but after yesterdays early reading of a surplus the market was quick to react, and today’s reading of 2.50M barrels show that oversupply issues may not be abating as previously though. This will weigh heavily on the minds of the bulls who looked to be taking control in the long term when it came to price movements, but it seems that with oversupply still being an issue and demand not picking up the bears are looking to take full control and force prices back down lower. Regardless of the technical movements and the market consensus the Jackson Hole summit will have an effect on the USD in the long term, which will trickle over into oil markets and I would expect that the result of this would move the market all together.
Technically speaking oil has been hammered by the bears today and is looking ever more like it’s going to shift into next gear and push down to support at 45.90. This level has been very strong in the past and could halt any further advances in the short term, but in the long term it may struggle given how in control the bears actually are. This level also contains the 50 day moving average just below it which could also act as dynamic resistance in the long run. Overall, I am expecting the bears to take control in the short term and push lower until they find proper support and the bulls look to regain control.
The market so far has been relatively upbeat about Jackson Hole and believes that Janet Yellen will indeed look to be somewhat hawkish. This is having a spill over in the markets as the S&P 500 has dropped so far on the back of the belief that the FED will indeed be hawkish and look to push a rate hike in the face of uncertain economic data. This is certainly in the realm of possibility as the FED does not want to give off the impression that it is indeed dovish.
So far the S&P 500 has failed to find any forward momentum and has been stopped by resistance at 2185 as the market lacked any reason to push higher. Instead we have been also trapped between support at 2168, which we saw the S&P 500 push down to today. The 50 day moving average has also moved up and is applying pressure in this area, but I believe it’s a matter of time before we see a push lower and the market aim for the next level of support at 2152.