USO's Probable Course

There's little doubt that Bernanke/Obama would like to see oil killed off, ironically it's Bernanke's policies that have caused a surge in commodities. I call it the Bernanke Chinese Finger trap. On one end is his economic policies and on the other, the unintended consequences (although some would make a strong case that the consequences were in fact not unintended as Tiffany's sees higher prices and food stamps see record usage). I've never believed in an organic business cycle, I do believe in a Fed controlled business cycle, but that's another story. Right now, we have an election coming up and the MENSA head of the Fed needs to prove his misinterpretation of the Taylor rule wasn't a misinterpretation.

So, USO...

 The RSI negative divergence with Stochastics above 80 (compare both red arrows) was a definite warning sign. As usual, resistance was taken out the last 3 days before USO plunged (pseudo-bulltrap).

 I've viewed this pattern in the white box as a big problem and akin to a bear pennant. If it is so, then the price pattern implied USO target would be near $33.

 The false breakout of the ascending triangle was promptly identified by 3C as exactly what it was, a false move.

 Here it is on the daily chart and as with most false moves, a reversal is in order. I can imagine 1 more relative high being posted before a drop of some magnitude, just because we see this action so often.

On the 15 min chart, we had about 3 days of accumulation near $38.60 and have moved up since then. It's not a huge divergence, probably not a huge position, but may be enough to make a marginal new high.

After that, I'd be watching 3C very closely to see if it is confirmed or if as I suspect, it's another failed move, but this time, if it is a failed move, I would imagine the shoe would drop in a more sever way.