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Bearish traders in West Texas Intermediate crude oil futures may have reached a capitulation point last month after failing to push the market below key support levels, signaling potential for a holiday or new year's rally above $90 a barrel, technical analyst Robin Mesch said in a monthly report.
Based on the nearby contract, NYMEX crude is up over 5% since reaching a four-month low at $84.05 in early November. That price is at the low end of chart support ranging from $84 to $88, the Oregon-based Mesch, a CME Group featured contributor, wrote in a monthly outlook.
"Bears' failure to stage a further decline against this longer-term support ledge can be viewed as a sign of capitulation and represents an opportunity for bulls to take the reins and stage a rally at the outset of the new month and into next year," the Mesch wrote. Recent price activity suggests crude may rise to at least $92, and possibly to $96.50.
In other CME Group markets, E-mini S&P 500 Index futures hold potential for a "substantial" rally into next year, potentially toward 2007 highs around 1,500 if prices can crack certain resistance points, Mesch said. In gold futures, a decline under $1,700 an ounce would be a sign of "interim seller control" and indicate prospects for a drop as low as $1,665.