Technical Outlook with COT Update

Technical Outlook with COT Update

WTI Crude Oil (CL) 65.91 basis September futures declined 1.72 points or -2.54% for the week after an unexpected inventory increase of 6.8 million barrels including increased imports.  While the increase doesn't seem like much compared to the 5-year range the market reaction as immediate since expectations were for another inventory decline.  Another concern: the summer driving season ends soon.

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This chart show a potential Head & Shoulder Top pattern already activated with multiple closes below the Neckline suggesting a measuring objective back at 60 where it began the advance last March.

Summary for the Disaggregated Commitments of Traders - Options and Futures Combined report as of August 14 before the EIA inventory report on Wednesday,  shows both "Managed Money" often called hedge funds and "PMP" defined as Producers, Merchants, Processors and Users, reduced their long positions by a combined 52,034 contracts.

 The chart below shows the "Managed Money" net long position combined with the long only position of "PMP" along with the upward sloping trendline (USTL).  Should either "Managed Money" or "PMP" continue closing long positions or "Managed Money" begins increasing their shorts then this uptrend will end.

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From this perspective watching the "Managed Money" net short position should be a useful indicator, since when they start aggressively shorting, prices will drop quickly.  For now they seem content to reduce their long exposure; consistent with a modest seasonal price decline like to one suggested in the price chart above.  

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21,285 short contracts vs. 22,498 short contracts week ending August 7, 2018

 

 

 

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Kind of a rough looking head and shoulders pattern, I'm just waiting for EIA's report to get some cold hard numbers. Easy to speculate with TA and news, but hard to ignore solid numbers.

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