Crude oil suffered an aggressive fall yesterday, and if we include the decline that was seen in the post NY noon trading session, the slide in prices from peak to trough within the past 24 hour period would be greater than US$2 per barrel - a significant decline by any measure. This drop matches well with the bearish risk trend that was seen during the early Asian session which was carried into the European and American trading sessions which saw stocks falling (albeit not significantly) yesterday, suggesting that the decline may be inspired by the loss in market confidence.
However, this assertion does not seem to be correct, as WTI continues to dip lower during the early European session despite S&P 500 futures pushing above 1,850 during the same period. Similar rallies could be seen in the AUD/USD and other traditional risk-correlated assets, suggesting that WTI is actually moving against broad risk trend today. Confirmation for this assertion can also be seen from the small rally right now towards 102.5, despite risk appetite appearing to have come off slightly.
Hourly Chart
The reason why WTI pushed lower may be due to bearish sentiment, with traders/speculators sending prices lower, expecting a larger than previously estimated build-up in inventories that will be reported later by the US Department of Energy. If this is indeed true, then it is likely that price may not be driven still lower. That is, if DOE numbers come in at around +1.3 million barrels, and upside risks increase should the final number match the previous estimate or come in lower than expected. Furthermore, given that S&P 500 Futures remained steady above 1,850 key resistance, the likelihood of risk appetite staying bullish during the US session is high. Even though WTI prices have been mostly ignoring risk trends since this morning, a bullish risk trend definitely will not help the bearish cause, will be neutral at best and may even pull WTI higher.
From a purely technical perspective, bias is still firmly in the bearish court, as long as prices stay below 102.5. Stochastic readings are pointing higher for now but looking at how the Stoch curve behaved in the past week, there hasn't been a case where a rebound around the 50.0 level resulted in a bullish trend reversal. The strongest bullish reaction that followed such a Stoch rebound was seen on the 20th of February when prices eventually traded lower once again after pushing higher. Hence, even if the same thing happened right now, 102.5 resistance will break but it is likely that 103.0 will hold, and bearish pressure will still remain though possibly weaker than before.
Daily Chart
The daily chart is more bullish though, as there is a case to be made for price to rebound from the Channel Bottom and head toward the Channel Top. However, Stochastic readings do not agree and are signalling the beginning of a bearish cycle. That being said, ideally the Stoch curve should push below the 70.0 mark, coinciding with price breaking below the Channel Bottom and perhaps even below 101.0 to confirm a strong bearish breakout. Without this, the possibility of the Stoch curve rebounding off the 70.0 mark and pushing higher cannot be ignored and we could still see prices moving up in the short/mid term.