Nearby Crude Oil Monthly Analysis for December 2012
Nearby monthly crude oil closed positive in November, but this isn’t expected to be a sign of higher prices to follow. Last month, turmoil in the Middle East triggered a nice short-covering rally on the daily chart, but this wasn’t enough to change the trend to up on the monthly chart.
Oversupply continues to be a major issue. Speculators seem to be leaning toward the downside and are expected to remain in this position until they are certain the U.S. economy has turned the corner. Talk of the “fiscal cliff” triggering a first quarter recession may be the reason bullish traders are scarce at this time.
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Technically, the main trend is down on the monthly chart. A trade through $101.61 will turn the main trend to up. A trade through the last swing bottom at $79.08 will reaffirm the established downtrend.
Based on the range of $114.30 to $79.08, a key retracement zone has been created at $96.69 to $100.85. As long as the market remains under this zone, traders should look for the market to remain under pressure.
The short-term range is $79.08 to $101.61. The retracement zone of this range is $90.35 to $87.69. The close under this zone has put the market in a weak position to begin December.
Another sign of weakness is the close below a downtrending Gann angle at $90.09. This angle has guided the market lower since crude oil topped at $196.09 in July 2008. As long as the market remains under this angle, traders should look for further downside action.