USO / GLD Follow Up

As a follow up to yesterday's TRADE IDEA: USO SHORT (PUTS) USO post, for the moment, I'm not changing anything , although if I feel the charts are supporting a change of view, I'll certainly post it.

Just as we closed GLD Puts temporarily yesterday, Closing down the GLD May $115 Putt Temporarily, in expecting a near term/short term bounce/noise which would allow us to keep the gains and re-enter the position, I believe the USO charts still support the position yesterday, although I do believe Oil is in the midst of forming a longer term trend/primary reversal to the upside.

GLD is up today nearly +.75%, which would have cut in to the GLD puts opened Friday and their 30% gain (on May monthlies in the money $115).

 The longer term GLD swing signals on a 15 min chart went from positive to negative which was the reason for the GLD puts (at red square) opened Friday.

However the near term 2 min chart, among others showed us a very short term/near term bounce that would otherwise be considered noise if the position weren't so leveraged, thus it seemed best to close it for the moment and then re-open it after the implied upside move from yesterday's positive divegrence on short term intraday charts, played out.

As you can see, today we have a +.75% move that is confirmed on a 2 min chart, which would have likely put the GLD put position at a loss or at least a significant loss of the +30% gains for little over a day of market exposure.

Likewise, the USO put position yesterday was based on the charts, although I do believe USO / oil generally has built a primary trend base that will support a broad move higher in a likely intermediate or primary Dow trend classification, a significant reversal of price to the upside far beyond the bouncing we have seen in USO that is still within the base area.

USO base area not only looking good for a longer term trend position (long), but with solid longer term 3C signals as well.

Short term, I expect a pullback in crude, which is many ways is very similar to GLD's multiple timeframe analysis as well including a likely longer term base in place for a trend change to the upside, although not as clear and clean looking as crude's.

As for yesterday's trade idea, I'm not ready to walk away from it yet, which is why I prefer more time than I think I'll need on the Put expiration (May monthlies).

Last night the API crude inventories came in below consensus, but the important one is the D.O.E's Wednesday 10:30 inventories which were out this morning with a beat, although now at 14 consecutive weeks of builds and 18 weeks of builds at Cushing, the longest in Crude's history, the actual build of 1.3 mn barrels was below consensus (just as API's was last night) of 3.5 mn barrel build.

However, also as part of the A.M. Update, the EIA's monthly report (not the same as the weekly inventories) sees Saudi Arabia increasing production/supply over the following month. The inventories explain some of the knee jerk reaction in prices, but they have little to do with the actual trade idea.

As for USO,

 This is USO's intraday 1 min chart, a short term chart which is appropriate as Option trade=s for me are usually shorter term in nature, I like to try to capture the initial momentum and then get our before the first serious consolidation as you can always re-enter without the drawdown on options which is significant due to the leverage.

The 1 min chart was leading negative yesterday as the initial USO minimum target area of the gap was filled.

Today the chart is leading negative as well suggesting distribution in to the knee jerk reaction to the upside on the lower than expected API and EIA crude inventory builds. Still Cushing is 90% full, we still have a record 14 weeks of builds and we still have the EIA's report that the Saudis will increase production over the next month.

 Intraday the 5 min chart is at a relative negative divegrence.

And most significant as USO has seen a number of week's in which the price and 3C trend were in line (green arrow areas), the opportunities are at the pivots at the divergences of which there have only been 3 significant ones on this chart for the year, the strongest is right now, 60 min leading negative divegrence as I suspect more work is to be done on the base area, perhaps even a head fake stop run below the March 18th, $15.61 lows, which on their own were a head fake move, breaking support at the $16.30 level before ramping approx. +25% higher since the stop-run/head fake of March 18th.

I probably don't have to say it, but with our market expectations of finishing up the last week+'s move to the upside in a reversal process, a dip lower in oil/Energy overall would be an interesting timing event as Energy is a large sector consisting of much more than just Energy/oil prices, but everything from exploring, drilling, transportation, storage, etc. are all part of the Energy sector which has given the market some upside assistance, a drop in crude and the overall energy sector around this area would be significant to our "What comes next" downside move as the reversal process finishes up in the broad market.

Crude Futures (Brent).

 /CL 10 min, ner term leading negative divergence.

/CL 7 min  leading negative divegrence.

/CL 5 min relative negative divegrence after the upside move since last night's API data, finally going in to a negative (relative) divergence.

I'd prefer to see this 5 min chart leading negative before adding to a USO put/short position, but I think the longer term 7 and 10 min charts are the higher probability unless they fail which they haven't thus far.