USO Reacting to $USD and Perhaps the API / EIA Set-up

USO has suena  decent , parabolic-like move since the open, this also coincides with the $USD's pullback since 9:30.

 1 min chart of $USDX (purple) vs Brent Crude Futures (candlesticks), you can see the inverse, normal Legacy Arbitrage correlation that is seen with most $USD denominated assets. The vertical yellow trendily shows where the move lower in the $USD and higher in USO/Brent Crude occurred this morning.

Here's a 1 min negative intraday divergence in $USDX, however the overnight action in EUR/USD, as on track as it has been overnight with expectations, those expectations were on a larger basis, not intraday charts, but 15, 30 and 60 min charts, a larger divergence, but not so much an immediate one, here's the post yesterday covering the currencies...EUR/USD, Greece and Goldman

When you get to the charts, you'll see the 15, 30 and 60 min charts of $USD and EUR confirming each other suggesting the EUR.USD see a larger move to the downside than anything seen overnight.

 Cl/Brent Crude futures intraday with a small negative divergence.

The other thought I had even though the $USD/Oil correlation above looks like a perfect explanation, is the recent tend of Tuesday after hours ramping of oil on the API report and Wednesday's selling of it on the 10:30 a.m. EIA inventories report, I wonder if there's some front-running going on, but that's a hard case to make with the $USD/Oil correlation above in a perfect legacy arbitrage / $USD denominated asset correlation.

 As for the daily USO chart, in one of my most recent updates I said we need to see USO break convincingly under the $20.25 area which is the upper trend line of a base area that has been in effect most of 2015.

On a daily candle basis, there was a break below the base trend line at the red arrow on Friday, but it was also a Doji-star reversal candle, although they (reversal candles) give no sense of target or time, simply that there will be a likely reversal, which for USO recently is not surprising as choppy/lateral as it has been. Yesterday formed a small bullish engulfing candle, not on increasing volume, but that would be taken as the confirmation candle of Friday's Doji-Star reversal candle.

Again, there's no implication of tim or target, in fact today could end as a Doji Star and we'd have a downside reversal candle, however this did occur in a recent range of support just below the $20 area.

 As for USO intraday, note the pick-up in volume around the $20.25 area (base upper trendily) and then a larger spike in volume on a down-tick. Since then, price has moved laterally which is often where we see some of the best divergences build, in a scenario like this, if price keeps moving laterally, that divergence would be expected to be negative.

Most current update of USO moving laterally since the chart above was captured.

 This is the 1 min USO 3C chart which has been in line to the downside with the occasional pop out of the trend. Interestingly one of them to the left in the red box was Wednesday June 17th. The day started with a gap up from the After hours Tuesday API inventories sending oil higher Tuesday night and in to the gap Wednesday morning followed by the EIA report Wednesday morning sending USO down as you see, this is the second week in a row this exact set-up has been used, push oil up on Tuesday (4:30 pm EDT) API inventories and push it down after a gap up on Wednesday's 10:30 a.m. EDT EIA inventories.

The point really being the 3C trend continuing lower with any price deviation away from that trend being brief, but this 1 min chart does show a small positive divergence at the area of the Doji star and yesterday's engulfing candle. This is why I wonder if this isn't front running of the API/EIA scam of the last 2 weeks.

 The next timeframe at 2 mins is in line and again moving to the downside with any price deviations being sent back toward the 3C trend. However the point of the chart is there's no similar positive divergence on the 2 min USO chart so I don't think it's very strong if it couldn't migrate over to the next timeframe with 2-days to do so.

 The 3 min chart is trending down and perfectly in line, again with price deviations from the 3C trend quickly returned to the trend.

And the 10 and 15 min charts are still the closest dominant feature, still pointing to a break lower in oil/USO back in to the range.

Once USO gets back in to the range, we have an entirely different story...

As this daily chart of Crude futures shows, last summer's decline wast a surprise, someone had dropped a lot of shares and 3C confirmed the downtrend the whole way. However the lateral movement in oil since the start of a daily 3C positive divergence opens a new story plot in the longer term story of oil, it's a much more exciting and profitable trade, but we're not there yet.

I still expect USO to come back down in side the base (see the yellow box area) and finish a larger base formation before the next chapter.