USO Update

Putting aside the argument of $US dollar (petrodollar) dominance as for right now, it doesn't matter, we do have to consider the $USD in any oil/USO analysis.

Last week I posted 1 $USD small bounce and late last week I believed we'd see another which is really just creating a choppy zone, but here are the most current $USD 3C charts and expectations very near term...

 5 min $USDX  positive divergence near term which is one of the reasons why I expected a $USD bounce early this week and a EUR/USD decline,

 More importantly (the 5 min chart is good for timing telling us it is nearby), the 15 min $USDX positive divergence through last week, again a strong signal for a short term bounce... unless this is a reflection of the market's perception or inside knowledge of F_O_M_C policy tightening this week. For now, I can't prove that so we'll just assume it's a normal $USD bounce within an already locally choppy area.

The longer term daily $USD chart has a clear leading positive divergence as the carry trade was on and a deep leading negative divergence as the $USD hit its high and moved to a primary downtrend, making lower highs and lows on a daily chart.

Above is the "Larger downtrend) at the red arrow that was part of the April 2nd $USD forecast (a small bounce followed by a much larger move to the downside). The yellow arrow represents the $USD's 7-day counter trend bounce. I fully expect the primary down trend to reassert itself, but in the white area right now we've had a lot of chop.

Why is this important? Because the $USD's effect on oil prices is still a real influence, no matter what Russia, China and whoever else would like to see happen, this is what happens...

 The $USDX in purple vs Oil futures (/CL=Brent) in candlesticks, there's an inverse relationship as the less the dollar is worth, the more they charge for oil, the more the dollar is worth, the less oil prices tend to be.

In the big picture of my $USD and USO analysis I expect $USD to continue making primary trend lower lows and I expect USO/Crude to reverse its downtrend from last summer and make higher highs, those two independent bits of analysis fir together well.

Here's a closer look at the inverse relationship between the $USD (Purple)  and Crude futures (candlesticks). This is not a perfect correlation, but roughly it's pretty accurate.

Thus if we are expecting a near term bounce in the $USD as the charts above would suggest, that would also mean it would be reasonable to expect a near term decline in oil/USO. If you recall the complete picture for USO, I have expected it to fall back in to the base area...

That would be below the upper red trend line or the white hash mark which USO is right under today...

And for USO to finish it's basing work which has been in effect most of 2015 before leading to a breakout and an upside reversal of USO's downtrend from last summer.

If you consider the near term $USD analysis (remember they move opposite each other), I have expected the $USD near term to bounce a bit and for that to fail and head to a new daily chart/primary trend lower low, so the two assets' individual analysis matches up t their correlation for closer term trade and longer term trade.

As for the charts for crude futures/USO...

 USO's 3 min intraday charts (and below) have mostly looked like gap fills, but although not a strong divergence (positive) on this 3 min chart, I do want to keep an eye on it and make sure current expectations are confirmed by charts.

 The crude futures charts look good. This is the 1 min intraday CL chart with an intraday negative divergence , more or less allowing the gap fill and then going negative intraday.

 The 3 min chart is in line nearly perfectly.

 As is the 5 min chart

 And the 7 min /CL (Crude futures) chart.

 And we've had a few divergences as can be sienna the 10-min chart, but currently in line with the downside price action as we are right at the area of the base's upper trendily.

 And the Crude 15 min chart in line since going negative at a "Flag-like" price pattern.

It has really been the 10 and this 15 min USO chart with a leading negative divergence through the flag-like consolidation that have really suggested a break back into the base to finish up some additional work before USO becomes a long term primary trend long position.

So far I don't see too much reason to close either the USO equity short or the USO July 17 puts, but as I said above, I do want to watch the charts and make sure the expectations laid out above see price and 3C chart action confirming and if there's something new or different, to make adjustments as need be.