Saturday, November 28

WTI bears take back the reins, Fibonacci targets in focus

  • Oil prices have been capped as covid spreads and vaccine hopes dwindle. 
  • US equities on the back foot as risk appetite fades, but bulls cling to OPEC hopes.

WTI has been on the backfoot since topping-out in the $43 area and is well on its way to completing a 38.2% Fibonacci retracement level of the daily impulse. More on this below.

Meanwhile, from a fundamental standpoint, the correction was initiated by dwindling sentiment in the prospects of how complete of a solution the first coronavirus vaccine can be.

The continuing rise in Covid cases has been weighing on risk sentiment, despite the welcomed news if Pfizer Inc.’s Covid-19 vaccine.

The vaccine is on track to be authorized as early as next month, but there are still many logistical challenges in getting enough of the global population vaccinated.

The US covid outbreak is uncontrolled throughout all states.

This has caused a snapback in investment preferences on Wall Street and a rotation from economic growth stocks back into the stay-at-home choices again.

Today, the S&P 500 is heading into the final 15 minutes of trade down over 1.45% which brings in the 6th Nov lows to focus:

Meanwhile, the IEA poured cold water on the bid mid-week with a reduction of demand expectations for this quarter and the first quarter of 2021.

However, analysts at TD Securities explained that the latest news from OPEC+ suggested that the cartel is considering both a potential 3-6 month delay of the tapering and a potential ‘tweaking’ of the cuts.

”In this context, OPEC+ still holds the key to support the market in the immediate term, while the prospect of a vaccine and further stimulus offer hope on the demand front, ultimately keeping the Great Rebalancing underway,” the analysts said.

”When combined with overly negative sentiment, OPEC+ support and rising demand expectations — particularly in the context of a potential vaccine — we see some room for the rally in energy prices to run in the near-term.”

WTI technical analysis

From a technical standpoint, there are two critical levels that can be noted on the daily chart from where bulls will likely step aside until bears have had their way for the meantime.

Credit: FX Street

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