In last Thursday's blog on crude oil I wrote:
"Crude oil prices made a new yearly high on Wednesday at $48.95 (June contract chart). That may have been a significant top, and if so we could see a sharp drop into next week's reversal zone; however, it is a little too far away from our target of $50 (or higher) so we could still see prices edge up into next week. If they do get closer to $50 next week, we will look to sell short."
Yesterday crude prices reached $50.21 (June contract chart) and today they are backing down a bit. There is strong resistance at the $50 - $51 level, and we are now in the dead center of a reversal zone for crude. It looks like a good time to sell this market short for at least a subcycle correction that could take prices back down to the $42 area.
I am going to enter a short position in crude today with a stop loss around $51. The current reversal zone could extend into late next week so there is a possibility of prices still edging higher, but the cycle structure is suggesting a corrective bottom next week, and that points to yesterday as the top and likely turning point.
The broad stock market is pushing higher into the center of this current reversal zone while precious metal prices continue to fall so these markets are also ripe for turnarounds (gold and silver up and equities down). I am going to hold off trading these markets until next week (the reversal zone could extend into next Friday). I will comment more on these markets over the week-end.