USO Update

It's been a while since we looked at USO specifically outside of the Energy Sector. I think what you'll find in looking at USO is that the same theme is playing out in the near term across a whole array of risk assets, whether the averages, currencies, individual stocks, ETFs and Sectors. I like to see that kind of action, a lot of confirmation via very different asset classes.

 First an overview on the daily chart, as you'll probably remember, I've been bearish (long term) on oil since late 2011. At (A) oil was pretty much lateral, during this period tensions were highest with Iran and oil simply refused to respond to the geo-political risk, which made me believe that the risk at that time wasn't much more than saber rattling. I expected oil to start to decline, at point (B) it started trending lower. At point (C) oil broke the downtrend to the upside, the media was saying it was because of heightened tensions with Iran, but the truth was tensions were higher during period (A) so I suspected that the move up was a short shakeout or head fake move. 3C confirmed it and the breakout at point (C) started trending down again, we had 1 last head fake move which is not marked here, but it was a brief move above the downtrend channel of (D), you can see price swing up, it moved just above the downtrend and as usual, that head fake move preceded a nasty drop down. For newer members, we almost always see a head fake move like this before a big reversal move (reversing the April 2012 move up).

 On a daily 3C chart you can see many of the signals, a positive divergence at the October market lows, distribution in the lateral channel (point "A"), 3C confirming the downtrend (point "B"), the negative divergence/distribution on the head fake breakout (point "C") and the leading negative divergence as oil picked up downside momentum at point D. If you look close you can even see the April 2012 head fake move above the downtrend channel had a negative divergence. Long term TSV 55 confirms all of these moves, but with less detail.

 The 30 min chart shows the negative divergence in to the point "C" shakeout (yellow box), around April 30th that's the head fake move above the downtrend chanel I mentioned, it too saw distribution. Currently on the 30 min chart we have a relative positive divergence, suggesting the probability of a move up as we have seen in nearly every risk asset we have looked at.

 The 15 min chart shows more detail in this current positive divergence which is leading positive. Again you can also see the distribution on the late April head fake move above the downtrend channel at the red arrow. The point being, the current positive divergence is on par with what we are seeing every where else.


 As for timing, the 1 min chart was confirming price action, it has been trending up in a leading positive divergence

 The 2 min chart shows where the strongest recent accumulation has been, yesterday's lows and it is in a current leading positive divergence.

 The 3 min chart also shows accumulation at yesterday's lows, confirmation of the move up and in yellow, rough confirmation of this congestion area today.

The  1 min chart today is nearly perfectly in line with price in the congestion today.

So it looks like oil wants to run higher in the near term like many other risk assets, the intraday situation is pretty much the exact same as what we have seen all day in the market.