Bulls Still In Control, But Signs of Being Overbought Remain

On March 2, 2012 by TradingDesk

It was a wild Thursday for energy prices, as technical momentum from Wednesday’s late rally was coupled with a rally in stocks that pushed contracts a nickel higher, only to see prices skyrocket after reports that a Saudi oil pipeline had exploded. WTI Crude spiked over $110, and Brent broke $128 before the Saudi’s released a statement denying the explosion. Gasoline prices were up 13 cents at their peak for the day. Although the event may turn out to be a non-issue, it did clearly show that the market is extremely sensitive to any supply shocks.

We are seeing some relatively modest selling today, largely driven by a plunging Euro as a host of new stories raise more questions about their financial system. Technically the bulls are still control of the action, but signs of being overbought remain. Energy Prices have correlated very strongly to stock prices over the past several years, and with the DJIA index having crossed 1300 more than 70 times in the past week and now trading below that level, it suggests that the energy markets may have to find their own direction for a while.

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