USO/SCO Update

USO has to be one of the most interesting (I'm not saying the most appealing) trades out there right now. With the Middle East uncertainty and the Iranian situation most definitely at the hottest it has been, I am surprised oil has not shot through the roof, I'm also surprised by the underlying trade in 3C, although one bad incident and all of that could change, although we've seen several bad incidents already over the last few weeks and not much has changed, it's interesting and the thing that I believe may be holding oil from exploding is a global slow down, global PMI manufacturing in contraction in many of the biggest exporters and especially China, this would argue for lower demand in crude, however as you know, common sense tells us that the Iranian situation is very volatile.

Here are the updates USO/SCO (inverse ETF or short on crude).

 USO 1 min isn't responding well this morning on the short term end, it has actually started leading negative.

 The longer intraday trend on a 2 min chart remains clearly negative.

 As does the 5 min chart.

 The important 15 min chart remains very negative looking and surprisingly so. Does someone know something we don't? I'm sure that's the case, but this would have to be something pretty decisive.


 And finally the hourly remains negative.

As for SCO (you buy this leveraged Inverse ETF long and have short (leveraged) exposure to crude; this should look the exact opposite of USO for confirmation.

 And the 1 min chart does look the exact opposite, leading positive and very strong.

 The longer intraday trend on the 2 min is also positive.

 As is the 5 min, so it seems SCO is confirming the weakness in underlying trade in USO.

And the long term 30 min SCO chart.

I maintain a position in the model portfolio in SCO short crude, although my natural instinct would be not to be exposed there because of the volatility in Iran, however the underlying trade seems to be saying something different. I will hold this position until something technically changes, maybe a new closing high or certainly deterioration in the 3C charts, but for now, I'll be holding as I am surprised by the nature of the underlying 3C charts.