(Click on image to enlarge)

For oil traders and speculators over the longer term, red had certainly been the dominant color over the last two months with the WTI contract falling from a high of $76.91 per barrel to today’s current price of $51.27 per barrel, and on the day moving below the psychological $50 per barrel before recovering ahead of the FOMC minutes later.

The question now is whether this longer-term trend is to continue lower still or have we now reached the bottom, and the answer to this question lies with the weekly chart more so than the daily. For the daily timeframe, it has been a consistent and relentless series of steps lower on rising volume and punctuated with weak rallies. We now have a chart with extremely strong price resistance in place at the $66 per barrel level which also coincides with the volume point of control, both of which are adding their weight to the heavily bearish picture which is confirmed by the trend monitor indicator at the bottom of the chart.

(Click on image to enlarge)

And so to the weekly chart, and perhaps the most revealing price action is that of last week and the associated volume and in particular how this compares to volumes in the price waterfall since early October. First consider the last three weeks, with widening price spreads, and yet the volume is starting to decline, albeit with Thanksgiving to consider. That said, the price action of last week was the widest to date, and yet the volume associated with it, is less or at least equivalent to the previous two weeks, where the spread of price action has been narrower yet volume is the same. In addition, compare the volume to that to the left of the chart in 2017. Hardly dramatic and one would have expected to see a significant volume bar associated with such extreme price action. So a clear anomaly, and suggesting the big operators are no longer participating, with a congestion phase likely to develop, and which may, in turn, develop into a reversal higher. Another factor, of course, is the US dollar, and following the comments from Chairman Powell yesterday who used the words ‘just below’ when referring to the neutral level for interest rates, any further sustained US dollar weakness would only help to provide further support for oil prices, unaided by any intervention by OPEC.