When the markets closed on Friday, traders and investors alike may have had reason for optimism. S&P 500 approaching a record high, Gold nearing a 4-week low as the attraction of safe havens seemed to have started to diminish.
The US and China sounded optimistic of further trade talks, with both also recording better than expected retail sales and CPI figures for August respectively. Crude Oil broke the $57 resistance for the first time since the end of July, reaching a high of $59, before selling off on news of that oil inventories were higher than expected at -6.912M.
This led to a Friday close of $54.83, which had been the floor for the past month. Were we going to see another bout of consolidation between support and resistance? This would have been the question many have asked. Then come the weekend.
Just before the open on Sunday evening, news broke that 5% of the worlds reserves were wiped out in drone attacks on Saudi Arabia , leading to a dead cat bounce with WTI hitting $61 and Brent $71, which was a rise of 20%. The largest intraday jump in history.
CrudeOil - Daily Chart - provided by Tradeview Markets
This rise swiftly ended at the resistance of $61 however, with Trump tweeting the US was “locked and loaded” for retaliation on culprits, and there will be “plenty of oil” available to make up for the shortage. Technials tell us the RSI volume at 63, means although close, the markets still aren’t overbought, so if this story does escalate, Crude Oil prices may in fact follow that upward momentum.
Now the question for this week will be, are traders going to flee back to safety, propping up the likes of Gold and JPY? Or will the bulls rally onwards, taking no prisoners in the process.