Crude futures are consolidating beneath $70/bbl and our 2nd tier downtrend line as volume continues to drop off since Tuesday’s sell-off. Meanwhile, the S&P futures are fluctuating around 1000 while the EUR/USD and GBP/USD consolidate. Therefore, investors have had little incentive to send crude into a technical recovery. However, our EUR/USD and GBP/USD trend lines are approaching their respective inflection points.

Hence, volatility could return soon considering the flood of new coming in the middle of next week. Of particular importance to crude will be the OPEC meeting and Chinese economic data. Though OPEC is expected to keep production unchanged, activity should increase nonetheless and investors will look for hints concerning OPEC’s expectation for future consumption and production. Additionally, China will release a wave of key data points on Thursday including its Trade Balance and Industrial Production numbers.

China’s importation and consumption of crude has been a major driving force behind crude’s recovery. Therefore, any sizable slowdown in Industrial Production could have a negative psychological impact on crude, and vice versa. Investors will also keep a close watch on the Dollar and U. S. equities. Crude futures should continue to exhibit a negative correlation with the Dollar since a weaker Greenback makes the Dollar-based commodity a more affordable import for foreign countries. Lastly, any significant deviation in the S&P from 1000 should bring crude along for the ride.

Technically speaking, crude made a downtrend statement by sinking below our 1st tier uptrend line on a spike in sell-side activity. However, volume is declining to the downside and crude futures remain comfortably above 7/6 and 7/30 lows. The immediate-term key will be for crude to stay above these lows and our 1st tier downtrend line. As for the topside, crude futures must face our 2nd and 3rd tier downtrend lines and the highly psychological $70/bbl. Therefore, crude will need a large upward movement backed by sizable buy-side volume to turn the tide. Overall, near-term momentum remains to the downside. Although, a week of positive economic events could reverse the momentum quickly.

Price: $67.83/bbl

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