BULLS STUBBORN UNDER RISK AVERSION

Oil initially dropped on Monday on worries of a second wave of coronavirus but rebounded after the Federal Reserve promised to buy corporate bonds. With oil prices moving into a more stable trading range between $35 and $40, the market remains supported just by technical.

Yesterday, the Philly Fed Manufacturing Index climbed to a high of 27.5, against all the odds where economists' forecast was about a -23.0. The data proved a resilient recovery in the U.S. economy despite rising cases in the country. As the manufacturing sector represents a significant oil consumption sector, oil traders gauge the data as an improvement in overall demand.

On the technicality of the price structure, the oil benchmark was able to claim back 14.70% of the value from the lower recorded on Monday. With the price continuing to hold tight to the rising trendline, give a clear path to retest the 40$ handle, where bulls are lining up to dive-in and most probably push the WTI index forward to the 44$ handle. MACD in a diminished bullish momentum with RSI in an overbought zone, price should experience some correction in the intraday realm.

Taking about the intraday in H4, the price structure has practically created an inverse Head-and-Shoulder formation, a technical pattern that supports the uptrending bias.

The second wave of coronavirus infections poses a threat to oil. A feared second wave of coronavirus infections may have arrived, with cases rising in many parts of the U.S., Germany, and Portugal also reported an increase in new cases. Meantime, the pandemic's epicenter is now the third world, with most cases in Latin America increasing much more rapidly. In China, new cases raised fears of a return of the virus. The government already moving into a level II emergency response has already cancel inbound flights for a total of 40%. With much of the market betting in a steady rebound in demand, any resumed lockdown or economic hit would pull oil back down as the pandemic continues to weight on the energy market. Happy weekend. See you all next week.