Head and Shoulders in WTI! Is the rally over for Crude Oil? Stock Markets Mixed ahead of FOMC

Welcome to a more unusual Market update to show what could be a significant development for Markets for periods ahead.

WTI Crude Oil is forming a Head & Shoulders ahead of the FOMC meeting, a first bearish pattern since the beginning of the War.

It sure is a risky, counter-trend, and counter-Market view, but here are the elements that could point towards the end of a WTI Rally.

First and foremost, advancements in the War:

Most of the key figures of the Iranian Islamic Regime have been eliminated throughout the first three weeks of the conflict, leaving a snake without its head for the authoritarian regime.

Overnight, Ari Larijani, the right-hand of the Ayatollah, along with Basij Forces Commander Soleimani, was eliminated in strikes.

These two figures were exercising heavy influence over the IRGC army for the former and the Political police for the latter.

This could prove to be a turning point in the ongoing US-Iran-Israel War.

The two-country coalition is now expressing more concrete plans to move further towards the securitization of the Strait of Hormuz.

If even Al Jazeera is saying that the US-Israel operation is working, the War could really avoid dragging out for long – this fundamental turn should ease pressure on the Crude Market.

While supply issues remain, particularly for Asian nations, less uncertainty often translates to easier Market conditions ahead.

Oil won't just flash back to the $55 lows from the beginning of the year, but less pressure on the head will help soothe Participants and inflation expectations.

Second, technical elements:

WTI Oil gapped higher to $101.30 at the weekly Open, which could have added further momentum to an already tense Market.

But the selling seen in the previous session formed a Head & Shoulders pattern. It is a strong sign of trend exhaustion, as bulls attempted to break previous highs but failed twice, also forming a lower high at the same time (overnight spike to $99).

The measured move target would hint at $85 oil in the short run. More advancements to the conflict would be required to sustain a more persistent correction in the commodity.

The pattern is invalidated if bulls close above $99.04 (overnight highs).

Keep a close eye on the 2H 50-period MA ($95.19), which is acting as short-term support. Breaking it could trigger the selloff.

Resistance Levels

• 99.04 Overnight highs (H&S Void above)
• $98 to $100 Resistance
• $106 to $108 June 2022 Resistance
• War highs $116 to $120

Support Levels

• Immediate Support 2H 50-MA $95.17 (bearish below)
• H&S Neckline $92.64
• $85 Head & Shoulders Target
• 2025 Highs Key Support $78 to $80
• $69 to $70 Main Support
• 2025 lows $55.00

The Stock Market is all over the place today.

After the overnight failed spike in Oil, Stock Indexes opened well but have failed to sustain momentum and are now correcting again.

Participants will be awaiting further clarity from tomorrow's Fed Meeting – The Summary of Economic Projections will be released, providing at least more clarity on what to expect from the Fed in 2026.

An FX and Fundamental preview for the event will be landing this afternoon.

Markets will be all eyes and ears to listen to what Jerome Powell has to say during one of his final press conferences tomorrow at 14:30.

The Dow Jones rejected the upper bound of its descending channel, opening the way for a more mixed price action ahead – 47,000 is the level to watch for the FOMC (Bullish if close above, bearish if close below).

Expect slow trading all the way towards tomorrow's 14:00 Decision.

Dow Jones technical levels for trading:

Resistance Levels

• Morning highs 47,429
• Pivotal Resistance 47,400 to 47,600
• Key Resistance at 48,000 (bull above)
• 48,400 to 48,500 mini-resistance

Support Levels

• Key Pivot 47,000
• Current War lows Mini-Support 46,300 and past day Double Bottom (bearish below)
• 46,000 +/- 100 pts November Support
• August highs 45,715
• 45,000 psychological level (Main Support on higher timeframe)

Safe Trades and keep a close eye on the US-Iran developments!

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