USO Update

USO has been one stubborn nut to crack. To be clear, I LOVE USO long on a primary trend basis, it has spent all of 2015 putting together a respectable base that should be able to hold a primary trend reversal.

However sitting right at the base's resistance area....

USO Daily chart/base with resistance (yellow) and sitting there on a divergence like this...

60 min (very strong timeframe of underlying money flow-3C) with only a small negative divergence to the far left and the rest of the trend in perfect 3C price/trend confirmation, the current leading negative divergence is vastly larger than the previous which was the push back down to the lower end of the range which created the large "W" base that's in place.

I can't see how USO could possibly have the gas in the tank needed to not only breakout to stage 2 mark up, but support that trend with such a divergent 60 min chart.

I believe one of the keys to USO breaking down this week is the $USDX. Hopefully you understand our near term and longer term $USD forecast. We are in the middle of the second trend forecast on April 2nd, the first was a bounce up which failed to make a higher high for the first time over the last year and the second trend was a "Larger" move to the downside" which is already in the books as well. We have had 1 counter trend bounce during this larger downside move and I believe near term we are on the edge of a second counter trend bounce before the $USD solidly puts in a lower low to go with that lower high to change the primary trend.

 30 min $USD with perfect 3C downtrend price/trend confirmation and a recent positive divergence from last week which was part of the reason for the $USD counter trend bounce forecast last week as well as the market bounce forecast mid-last week that started Friday.

If you look at the $USD (candlesticks) vs Crude Futures (purple line), you can see a typical, historical legacy arbitrage correlation...

 Because oil is a Dollar denominated asset, the historical legacy carb. correlation sys a lower $USD means the price of oil (and other $USD denominated assets) must rise to make up for it. In the same fashion a bounce in the $USD means lower prices in oil and $ denominated assets. The near term counter trend bounce just shown above in the $USD "should" add extra downside pressure on oil/USO to pullback, gather a head of steam and make a solid run at a breakout of the base to stage 2 mark-up.

This 30 min chart shows the inverse nature of the 2 assets because of the Dollar denominated correlation.

This 5 min chart gives you a closer view and perhaps explains why USO has been so stubborn about pulling back as the lower $USD has been supportive of oil (as well as inventory developments).

 10 min USO leading negative divergence.

 Crude Futures 7 min leading negative divergence.

 Crude futures 5 min leading negative

 USO 3 min negative

USO 2 min leading negative.

We should see USO break to the downside as the $USD breaks to the upside which I believe is likely to happen by the morning.