Crude Oil Starts The Week Down as European Debt Crisis Looms Large

Crude oil starts the week on a sour note falling for a third day, the longest decline in a month, as most traders feel that Europe will not shake off their debt crisis and economic growth will continue to be under pressure. Combine that with the return of normal production in the Gulf of Mexico as hurricane season appears to be winding down.

Crude oil was lower in Sunday evenings overnight trading as it extends the decline off last Wednesday's high. Stochastics and the RSI are still overbought, diverging and are turning bearish signaling that sideways to lower prices are possible near term.

Closes below last Tuesday's low crossing at 83.20 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.15 later this fall. If October renews the rebound off August's low, the May-July downtrend line crossing near 92.85 is the next upside target.

First resistance is last Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.85. First support is last Tuesday's low crossing at 83.20. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Monday morning trading is 87.46.

Oil N' Gold: Weekly Technical Outlook For Crude Oil

Crude oil edged higher to 90.48 last week but lacked follow through buying and failed to sustain above 90 psychological level. The recovery from 75.71 is so far slightly stronger than expected. But the look of the price actions are still corrective, thus, favoring it's merely a consolidation. Hence, while further recovery could still be seen as long as 83.20 minor support holds, we'd expect upside to be limited below 100.62 resistance and bring resumption of fall from 114.83 eventually. Below 83.20 minor support will flip bias back to the downside for retesting 75.71 low first.

In the bigger picture, medium term rebound from 33.2 is treated as the second leg of consolidation pattern from 147.24 and should have finished at 114.83 already. Current decline should target next key cluster support at 64.23 (61.8% retracement of 33.2 to 114.83 at 64.38) next. Sustained break will pave the way to retest 33.2 low. However, break of 100.62 resistance will indicate that fall from 114.83 has completed after meeting missing 100% projection target. The corrective structure of such decline in turn argues that rise from 33.2 is still in progress for another high above 114.83.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave might be finished. Upon confirmation of medium term reversal, the third wave of the pattern should have started for a retest on 33.2 low.