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CRUDE TESTS KEY SUPPORT AS GEOPOLITICS AND CHARTS COLLIDE

NYMEX Crude futures CLc1 are lower Tuesday vs. Friday’s close as optimism grew that the United States and Iran were moving closer to a peace deal that would reopen the Strait of Hormuz, even though Washington and Tehran played down hopes for an imminent breakthrough.

That said, prices have bounced off session lows following U.S. military strikes in Iran, adding another layer of uncertainty around how quickly any agreement might come together.

At their worst, front-month crude futures dropped as much as 8.8% to $89.41. They’re now hovering around $92.50, still down around 4% on the day.

From a technical standpoint, traders are closely watching how prices behave relative to the monthly Ichimoku Cloud.

For context, the Ichimoku Cloud is a Japanese technical system used to gauge trend direction, momentum, and key support/resistance levels.

Taking a step back, crude broke above the top of the cloud in March, a bullish signal that helped drive prices as high as $119.38.

In April, prices fell back into the cloud, hinting the uptrend was losing momentum. Still, they managed to close the month above it.

So far in May, the upper edge of the cloud, which is now around $89, has acted as support. Prices briefly dipped below that level to $88.61 on May 6, but quickly rebounded, suggesting the bullish trend is still trying to hold.

However, if crude ends May back inside the cloud, it could signal a trend reversal and open the door to a deeper, more prolonged decline.

For perspective, futures hit a low of $54.98 in December 2025, while the lower boundary of the monthly cloud now sits around $45.

On the equities side, mid-May strength helped the S&P 500 Energy sector .SPNY shake off what had been shaping up as a bearish head-and-shoulders pattern. But if crude slips back inside the cloud, energy stocks could soon see support levels come under pressure again.

With a loss of more than 1%, the Energy Select Sector SPDR ETF XLE.P is the only S&P 500 .SPX sector ETF quoted down in premarket trading on Tuesday.

(Terence Gabriel)

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