Market Report & Analysis for 1/18/2018 Morning Edition
Morning Market Overview
After strong gains last week, the oil complex retraced modestly to start the shortened US trading week in a light round of profit taking selling. Nothing changed from last week with the market sentiment still suggesting higher prices going forward.
The only negative that has emerged since late last week was an increase in the number of oil rigs deployed to the US oil sector as we discussed yesterday. Oil like any other market is not going to go straight up every day even if all the short to medium term signs are still bullish. There will be down days with normal uptrends forming a choppy upward moving price formation.
From a technical perspective, the oil market is ahead of itself with the oversold/overbought indices all suggesting the market is technically overbought. When this category of technical indices points to an overbought condition the probability of a downside correction increases.
That does not mean prices will collapse rather it suggests some long side traders may decide to book profit and take a portion of their long side risk off the table.
On the financial front, global equity markets were mixed. The Index increased with the US markets opening strongly higher but ending the session only slightly lower. The EMI Index increased by 0.47 percent with the year to date gain now at 4.2 percent. Nine of the ten bourses in the Index are now in positive territory for 2018.
Australia is in the worst performing spot in the Index with Hong Kong in the top spot with a 6.6 percent gain for the year. The higher value direction in global equity markets today was a positive price driver for the oil complex. On the currency front, the US dollar Index was lower for the day with the Yen/USD and the Euro/USD higher.
Overall the currency markets were a positive price driver for the oil complex Tuesday.