The Light Sweet Crude markets fell during the Friday session as the risk off trade came back into vogue. The oil markets have been very positive lately, and this rest is quite common. The pair has found the $105 level as support, and is targeting the $110 level. The $110 level has to give way in order to see the bull market continue higher. The tone for oil is definitely higher, so this will more than likely happen given enough time. However, the consolidation does look somewhat formidable for the short-term.
The fundamentals all line up for higher prices, and as a result the trend upwards should continue. However, there comes a point where the price becomes an issue for economic growth. This is exactly what the market is wrestling with at the moment.
With the Iranians becoming increasingly defiant about the West and its determination to close down their nuclear program, this will continue to push the price of oil higher over the long run as fear of supply disruption continues. However, it must be said that even with all of the talk, nothing has actually happened. Of course, the Israelis could always launch a strike, and this has the market concerned as well.
The current attitude of the markets suggests that the trading will be confined in the $105 to $110 area, but the bias still remains. Quite frankly, the $110 level is simply minor resistance with the real test coming at $115. The market will continue to follow headlines, and react accordingly of statements out of Israel, Iran, and the United States. Any suggestion of conflict or the Iranians actually blocking the Strait of Hormuz will send the price of oil much higher, and in short order.
With all of this being said, we see the market as a buy only one, and are more than happy to buy the dips. The $105 level should offer an opportunity to buy on the cheap, and we will look for the supportive action on shorter timeframes such as the hourly chart to buy. We are willing to buy as long as we stay above the $100 mark.
Oil Forecast March 5, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3