By Ashraf Laidi
The rally in oil (US WTI & Brent) began in late June, while the uptrend in equities started earlier, after the bottom in early June. But oil has outperformed the S&P500 since July, rising 4%.
US crude oil shows signs of exhaustion on the daily chart, testing and failing to break above its 100-day moving average for the 4th straight day, which could see a pullback towards an interim support of 90.60, followed by the June 28 trendline support of 89.80. This may lead to the first weekly decline after 2 consecutive weekly gains. The aforementioned 89.80 is backed by the 200-week moving average of 88.15, which is likely to hold into month end, considering markets’ reluctance to re-engage into any considerable bout of risk-off mode before the Fed conference in Jackson Hole later his month.
Upside is capped by interim barrier at 94.70 (last week’s high), followed by more considerable pressure point at the 100-DMA (96.10). The high profile resistance remains at the 200 DMA, now at 97.30.
Monthly oscillators rest on a stable and positive trajectory, which (so far) supports the case for an extension towards 97.00 before the end of September. But any aggressive gains in August and September are seen capped at 101.20 and 99.35 respectively.
Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index