USO / Oil Update

I keep seeing all of this analysis as to why oil did what it did on the upside and why it's not going to do any more or why it is, reasoning from the drop in Rig counts, the steady output despite the drop in Rig counts, HFT's and correlation (action) to rig counts, etc., etc., but this divergence and price change in character was in place long before last week's "Rig count".

Again, I do not think there's a trend reversal in place in USO or oil broadly, but counter trend moves can be some of the most exciting moves you'll see and that is what I have expected from oil since its divergence started building clearly. Again, financial media tries to make sense of a topic so complicated and intertwined with numerous other conditions, each changing daily that effect all outcomes, that it's absurd to think that they can explain why the market did what it did in a 30 second soundbite and if they have the answer, why weren't they calling for a bounce before the fact? Whether we understand or not is not the issue, smart money can and does move assets, while we don't know what they know, we can often see what they are doing which is all we need. Trying to understand the complexities in a 30 second soundbite is just human behavior thinking and hoping it can make sense out of and master a system so dynamic and intricate that if they were told the whole truth, CNBC would have no viewers and I doubt there's a person alive who could tell the whole truth of any one asset.

The mistake is in human hubris that assumes it can control and dominate an environment, in this case, nothing could be further from the truth, although once you get past that ego-driven assumption, you can make money in the environment.

 USO daily chart's change in character from a clean downtrend to a selling /capitulation event, to a lateral base and a head fake move leading to a strong breakout on excellent volume.

 This is one of the longer term 30 min charts we have been tracking. For one of the latest updates for USO, I chose this one just because it gives you some additional information or view points to consider as it relates to the broader market, USO Update & Effects

 The 5 min chart since the head fake area below support, we do have a small negative divegrence intraday, perhaps a consolidation after Friday's gain, although I don't think it will make much difference, just like GLD saw a gap fill bounce after it's initial big move we were looking for, as you saw in the last update, the near term price action of the last 2 days really doesn't amount to much in the GLDD analysis and expectations.

 On the CL (Brent futures) chart, 30 min, you see the same leading positive divegrence at the same head fake move area below support.

Intraday 1 min, we are not seeing anything very worrisome, it looks like we are just consolidating some gains on a strong, near +7% move after all this weakness.