Daily Wrap

Today went surprisingly about as close to our Friday The Week Ahead forecast as could be, in fact on such a minor morning forecast for the new week, I've already had several members tell me they made decent money as the forecast was correct, but not the biggest move by far.

The open of Index futures last night just didn't look right, despite there being ample reason, although one would have thought it would have been fully discounted which it appears it was, I'm referring to the widely predicted Syriza win in Greek elections Sunday which put Alex Tsipras in the PM's seat with Syriza, the anti-austerity (perhaps you might say anti-bailout party) at a near majority taking 149 of 300 seats and then later forming a coalition government with the right wing (also anti-austerity) Independent Greek party.

Syriza has campaigned on ending austerity programs in Greece which have been part of bailout deals Greece has received, but put the country through much pain and seeking a debt write down. In a few of Tsipras's first acts as new Prime Minister, he sent a message to the Euro-zone's largest Greek creditor, Germany, by visiting the Kaisariani rifle range where Nazis executed 200 Greeks in May of 1944.

He also had his first meeting with none other than the Russian Foreign Ambassador.

It seems the Troika (and those related) have been quick to send congratulations and maintain and over-concillatory tone from many of the statements I've read from people like Jean-Claude Juncker, the European Commission President; Christine Lagarde- the managing director of the IMF and various Finance Ministers from across Europe. In addition, it seems these creditors are quick to get the word out that they are "looking forward" to "working with" Tsipras on potential redrafting of terms, perhaps interest rates, etc., but the 19 nation Euro-Area has drawn the line at "Debt Write-downs" which is what Syriza campaigned on. Judging by his first day as PM of Greece, I suspect the story is going to be far more complicated than the market currently envisions which is either some sort of compromise or what most have already come out to clam would be a "manageable" Greek exit from the Euro if worse came to worse, but I only mention this because it seems in the market as in life it's always the lack of immagination that gets you, the things you didn't discount or imagine as being a probability and don't think other leftist break-away regions in neighboring countries around the periphery aren't going to be watching every move.

The overnight gap down when futures opened was essentially erased by the cash open, but we did see the early weakness we were expecting in the market today followed by some stability and most of all, the forecast from the Week Ahead,

"I think the IWM/Russell 2000 outperforms the other averages early in the week as it has not met minimum targets and has some better looking charts relative to the others."

With the SPX at +0.26%, the Dow at +0.03%, the NASDAQ 100 at -0.06%, the Russell blew them away on a relative (or any other) basis at a closing gain of +.99%!!! However, remember the conditions why I expected the R2K to lead, this was speculation based on the IWM charts which also look far better on a relative basis as well.

While we are briefly touching on news, the Dallas F_E_D came in at -4.4 , printing at the worst level in 20 months with every sub-index falling except inventories. In addition, 11% of companies reported lay-offs which brings us to IBM.

Forbes ran a story about the IBM plan, "Project Chrome" in which IBM was expected to lay-off 1/4 of its workforce, some 110,000 people globally, however shortly after the open IBM came out and essentially denied the rumors in a rebuking fashion and mentioned earnings reports that made it clear that their lay-offs were limited to several thousand employees.

Oil had popped earlier today on comments by Opec's General Secratary, El Bardri that oil "could" reach $200 a barrel if there's a lack of investment following this price slump and added that the market was currently over-supplied by 1.5 mn barrels a day. This move didn't last as USO/ Oil closed lower, however if you saw the USO / Oil Update post today, one of the probabilities mentioned was a head fake move below the recent range and support before an upside move higher, take a look at the linked post.

Charts still look favorable for a short squeeze bounce in oil/USO, again, see USO / Oil Update from today.

Speaking of Short Squeezes, today's intraday gains after early weakness were brought to you by the Most Shorted Index (MSI) which closed up 2% today, of course small caps led by the Russell 2000 were hot on the day. The non-sequitur (if I may use the phrase) was the day's leading Industry group,  Energy at +1.43%. Otherwise 6 of 0 S&P groups closed green and the laggard was tech at -.41%.

In another strange twist, Gold (GLD) was down as we have been expecting a pullback, -1% and Silver (SLV) was down an even sharper -2.17%, but copper was up roughly +1.88%!?!?

GLD looks like it could see a little bounce/gap fill very short term, but I'm still expecting more of a pullback, in fact we really just got started on the move we have been expecting.  As you probably read last week, I am interested in what GLD looks like on a pullback as a potential longer term move higher that we have also been making a case for.

GLD 10 min negative divegrence after having been in line (3C/price trend confirmation at the green arrow).

While we are at it, 195 of 238 Morningstar groups closed green today, which was a bit of a surprise.

I wouldn't say there was a Dominant Price/Volume theme today, but if there was a "close as it gets" it would be Close Up/Volume own which is the most bearish of the 4 possible relationships, but again, it wasn't really dominant.

As for our bounce, we did see some deterioration in it today as I expect to see this week, but I do NOT believe it's over yet. Most of the averages have barely taken out the minimum upside target posted over a week ago as the base was being put together, others haven't even hit the minimum downside target.

One of the things I saw today when looking at Leading Indicators and market ramping levers was many of them looked like they were ready to be use or were already in use. For example,

 Note the ramp in HYG near the end of the day, one of the most popular market ramping assets.

And as far as 3C support, while it may not have been a big positive divergence in HYG, it was supported intraday...

 HYG in line with 3C.

Here I've inverted the SPX prices (green) so you can see the normal correlation between the SPX and VXX, you can see weakness in VXX beyond the normal correlation at the end of the day as well.

I looked at some other leading indicators ad whether they show specific evidence of a late day ramp or not, many still are in line and need to go negative (which can happen quickly) before I'd consider making any big moves.

For instance...

 Our Pro Sentiment Indicators are still in line with the SPX rather than diverging , you can see to the far left where they actually led the SPX at the bottom, I'd expect them to lead in similar manner at the top.

 PIMCO's HY Fund is nearly perfectly in line with the SPX, another I'd expect to go negative with High Yield Corporate Credit and HY Credit in general.

 Here's one HY Credit asset that's not following the SPX higher, but it's not a typical ramping asset either, which often makes it good for signals, but as long as HYG is offering support, we aren't at a top in my view, thus I'd still urge patience and let this trade come to you, we waited long enough for the bounce!

 TLT (20+ year Treasuries Fund) was in a wide range today, I've mentioned several times there are some charts bothering me here, so they haven't cleared up, I think I';ll probably update TLT in full tomorrow before the F_O_M_C Wednesday.

As for yields which move the opposite of bond prices and often act as a magnet, pulling equities toward them, we have some interesting signals forming.

 I suspected we'd see yields diverge from the SPX (green), here the 5 year yields did diverge Friday and was in line with our call for early morning weakness today in the major averages, but otherwise it's pretty close to in line, perhaps this is the start of a larger dislocation/divergence.

 Taking a longer look at the 10 year yield which is behaving more as I'd expect right now, you can see how it has led the SPX lower at critical areas in not confirming or outright leading. The leading negative divegrence here is pretty steep.

And the 30 year yield is also at a significant dislocation, this is obviously part of the curve flattening we have been seeing (look at the difference between the 5 year and 30 year yields). In any case, we'll take a close look at TLT and 30 year Treasury Futures as this troublesome area on TLT's 3C intermediate charts hasn't cleared up.

However, right now this is the kind of divergence I expected to see before the bounce got started when we were still basing, so I suspect this is a solid signal, just some of the other Leading indicators that can move fast when they need to, are not there yet.

This is a very close intraday look at 30 year yields vs the SPX, again they were leading negative late last week, likely leading to some of this morning's weakness.

I've been looking at the SPX:RUT Ratio custom Indicator (red) maybe a bit too closely, standing back a bit it is NOT confirming this bounce which shouldn't be a surprise as we have expected to see distribution in to the bounce. Additionally the custom VIX Term Structure that gave 2 buy signals (white), the first was the failed bounce off the 1/6 lows and failed with nasty negatives on 1/8 and the second was the "W" base from 1/14 to 1/16, is not going "negative", IO have no negative signal for it (just the white buy signal), but it is moving pretty far away from that buy signal's strength.

The main indication is the lack of confirmation between the SPX:RUT Ratio indicator (red) and the SPX (green). This is good to see, but again, while I feel pretty darn good about the bounce scenario and how it will end, even as of last Friday I expected it to go on a bit longer through this week.

It will be interesting to see if we pick up any strange signals going in to the F_O_M_C on Wednesday, it has been a couple of years since we have picked something up, but we have picked up some undeniably strong signals at least 3 times that were right on so while I doubt we see a rate hike this week, especially with the way macro data is going and lay-offs (deflation from oil), You never know and it's often that passing glimpse that gives you more information than you can collect in a couple of weeks so I'll be busier and busier looking for anything out of place in to Wednesday.

Finally for the moment, SKEW is still elevated at 135, not as high as last week's 139, which was a 15 point move in 2 days. I suspect the SKEW, also known as the Black Swan Index which is telling us there's a lot of buying of deep out of the money puts, may be hedging in to the F_O_M_C, but since there's so little consensus on a rate hike at this meeting, it doesn't really make a lot of sense, unless here's something out there we haven't quite seen yet. This is what I'll be looking for.

If I see anything that looks interesting in Futures tonight, I'll let you know, but I don't anticipate it as you know I feel we still have more upside to go on the market bounce which was essentially dead today outside of the IWM.

Market Update

I can't say today's action thus far is much of a surprise, I also wouldn't get too hasty in jumping the gun,  as I've said many times before, the one lesson I've had to lear and re-larn is what seems to be reasonable in terms of time and targets can usually be multiplied by 2 or 3, market moves generally aren't reasonable, they are extreme and they are that way for a reason.

I still need to look at several other indications  including leading indicators and the charts of several Leading indicators and the market levers.

To give you a general idea of today's market action, it isn't too far off if at all from Friday's "Week Ahead forecast with morning weakness even though Index futures pre-market didn't reflect that, the 3C concept of picking up where it left off, even over a long weekend came in to play as we have seen so many times before. Later morning/ear;y afternoon strength picked up a bit and the R2K led the averages as expected and finally, the thing I'm really looking at this week is the bounce cycle to go negative enough that the base area is taken out beyond repair.

Here are some examples...

 As we have been pretty much non-stop talking about since before the base of the 14-16th formed, we'd almost certainly need to see higher prices before we saw negative divergences/distribution. The previous cycle that came from an oversold condition around Jan. 6th saw strong selling much faster than I'd normally anticipate. Remember the F_O_M_C meeting starts tomorrow and the policy announcement is Wednesday. While there hasn't been much communicating a rate hike in Q1, in fact the earliest has been Q2, Bullard last week was very hawkish and you might almost say that he was essentially saying were should be raising rates now, I don't think the market has discounted a January rate hike, it doesn't "seem" like the economic data would be in line with a Q1 rate hike. The closest thing to guidance from Yellen was a "couple" of meetings for a rate hike and defined a couple as two, that wouldn't suggest a rate hike this week either, but it's a wild card. We have found some apparent leaks before, I'll obviously be on the look out for them now.

This is the 1 min IWM, the white trend line is Friday's close so you can see the IWM did offer higher prices that could be sold in to and that intraday 1 min chart doesn't look great here.

 Nor does the IWM 2 min with Friday's weakness at #1 which was the basis of "The Week Ahead" post, the early a.m. weakness on the open followed by strength intraday and that continued divergence at #3.

IWM 3 min chart makes the trend a bit more clear, highlighted below on the time scale are Friday and today.

The IWM had the largest positive divegrence reaching out to the longest charts, this is the 10 min from the accumulation/base to in line on the move higher and a negative divegrence clearly forming on a strong timeframe.

QQQ 1 min with Friday's afternoon weakness, early a.m. weakness on the open and an intraday positive lifting prices to Friday's close (yellow arrows and light blue trendline) as well as a negative divegrence on the only cross above Friday's close as of the time of this capture.

 IWM 3 min from the base area on the 16th, pretty much in line on the way up and recent negative divergences that may just have something to do with one of the area we expected to see a clean break out above on this mini cycle...

The bearish descending triangle that most technical traders see as a bearish consolidation/continuation price pattern. If there weren't so many "Buy the dippers" out there, I'd say this was setup as a head fake using T.A. against traders, even though technically this is not a true descending triangle.

 QQQ 5 min with the first base and attempt from earlier in January with the sudden and sharp failure starting on the 8th and the next cycle at the 14th-16th with a 5 min relative negative divegrence, but it's clean. You can also see why I think patience here is probably the best course until this chart is just jumping off the screen.

 And at the next rend in multiple timeframe analysis, the 10 min which has been part of why I have expected this bounce to ultimately fail, the 10 min has been negative throughout this entire chart and is very close to posting a new leading negative low.

 The SPY daily chart with the head fake moves ABOVE the Broadening top price formation that we expected and the same descending triangle breakout that we also forecast in advance.

SPY 1 min intraday has added to Friday's negative divegrence in the afternoon, even though the SPY didn't move very far today above Friday's close.

 SPY 5 min with the earlier January cycle/base/bounce attempt and the second base/bounce with what is now becoming a more serious leading negative divergence.

 And the SPY chart's positive made it out to 10 min, so I'd like to see this chart jump off the screen with a leading negative before taking any action, the leading negative divegrence in place from Friday and today is pretty clean considering we were seeing in line/confirmation signals before that.

 And the 15 min SPY chart , also near a new leading negative low.

This is today's intraday TICK as of the capture just after 3 pm, you can see the trend changes in breadth.

I need to look at Leading Indicators and several other assets, but I'd say patience is still probably the best course and we seem to be making the steady progress expected, if not occasionally seeing some heavier than usual distribution.

Quick Market Update

The intraday charts are getting pretty ugly as we approach the close, especially in the averages that moved, for example the Russell 2000/ IWM. I'll post charts ASAP, I also want to get a look at leading indicators which I'll post if there's anything exciting, but the way it is looking right now, I would not be surprised to see some weakness in to the close.

Charts are on the way, I just needed to get this out quickly.

IBB NASDAQ Biotechs Follow-Up

I'm really updating the intraday charts here and the cycle or broad market mini cycle / base from Jan. 14-16th, but I did notice something similar to AAPL, both assets (NDX Biotechs & AAPL) are influential in the NASDAQ (even though Janet Yellen specifically came out and essentially said, "The rest of the market is fine, but Biotechs and Social Networking stocks are frothy".

In any case, it's a little bit interesting that our charts from last week suggested that the Russell 2000 outperform and the NASDAQ is the laggard today. From The Week Ahead on January 23rd...

"I think the IWM/Russell 2000 outperforms the other averages early in the week as it has not met minimum targets and has some better looking charts relative to the others."

I did add some longer term IBB (NASDAQ Biotech Index) charts just because of the similar situation described in the AAPL Update just posted and more broadly, the head fake concept.

 This is the daily IB (NASDAQ Biotech Index) chart. Note the same resistance level that is present in AAPL. There were a couple of pushes above intraday that failed, but the a breakout above the area in yellow, also take note of the volume on the "breakout", not exactly inspiring for a breakout,

 This is a 4 hour chart (3C) of IBB, I drew in the same trendline, it looks a little different because you are seeing intraday activity rather than the trendline across closing activity, but the same area. Also note that 3C is generally in the same place between points "A" and "B", which is essentially confirmation that nothing big has happened between those two points in similar price, however as we have been talking a lot about even before this most recent bounce got moving, because of the large size of positions and the supply./demand dynamic and a market that is seeing some really thin liquidity, especially in futures, we only expected to see negative divergences in to higher prices and just as soon as price crosses above the "breakout" area (yellow trendline), look at the very obvious change in character of 3C, a leading negative divergence. 

I actually like this indicator a lot, Don Worden's Money Stream. I don't use it a lot because often it's not very detailed or misses some stuff, but when it is giving a good signal, it's really like 3C in that when a divergence jumps off the chart and you don't need to search for it (as with any indicator), those tend to be your best signals, especially if you can confirm them in multiple assets, multiple timeframes and multiple indicators that you trust. Again, at the breakout level Money Stream (daily) leads negative.

I'm really just trying to show the bigger picture, but this is generally the kind of head fake move and confirmation that I like to use to my advantage.

 The 60 min chart has a bit more detail with a negative divegrence in to the October lows which is the same divergence seen at the head fake levels in the averages in September that led to the October lows and of course that base that formed that we described as leading to a "face ripping rally", but again it's the large leading negative divegrence to the far right.

And on a 30 min chart that was mostly confirmation in the timeframes, again a leading negative divergence at the same trendline/resistance area and break above.

This is just to establish a larger picture view as a refresher.

Perhaps some of this upside in bios that can really move (despite Yellen's warning on the Industry)  is due to the NASDAQ Composite's breadth which is not good. Below is the NASDAQ COMPOSITE, not the NASDAQ 100 (in red) ad the Composite's Advance/Decline line (green).

 Note the leading in the A/D line through 2013 and the start of 2014, then look at what happens, the A/D line not only can't keep up with the Composite which is a much broader measure than the NASDAQ 100 or even the SPX, but it is leading lower, essentially more stocks are moving lower than higher. We've seen this same thing in a number of breadth indicators around the same time in 2014, in fact the percentage of stocks above their 40-day and 200-day moving averages has been well below 50% for a lot of the time, sometimes significantly below.

Now that a little bigger picture and the head fake concept and how we try to confirm whether a move is a real move or a head fake, it's really the intraday charts I wanted to update, I just thought that this situation was so similar to the possible scenario offered in AAPL, that it was worth posting as a concept.

 As you have seen numerous times over the last week+plus, the base area in the overall market has been around the 14th-16th of January and largely on 3-5 min charts with a few exceptions. You can see the positive divegrence (base) in white to the left and at the green arrows, the 5 min chart's in line status, which is what I was talking about Friday in saying,

"I suspect it probably won't take too much longer (in to next week) for the bounce to start to fail, leaving us some good opportunities to set up some nice short positions or add to.

I am still waiting on a few leading indicators to give clear signals , but this can happen very quickly."

For example, I'd want to see this 5 min chart fail, note we've already seen a negative divegrence above on this timeframe which seems to be the most important for this particular cycle.

On intraday 2 min charts we've already seen the divergences getting ugly, looking a lot like the January 8th (and the next few days) with aggressive selling). As you know, we look for the divergence to gain enough strength that it migrates to the next longest timeframe, and in this case, since the positives are largely out to the 5 min charts, that's what I was talking about above in watching for this week.


The 2 min divegrence above this chart is migrating to the next longest chart, the 3 min, also showing a negative divergence at the same place earlier around the 21st and leading today. The next move would be for this to strengthen and move to the 5 min chart, that's what I'm essentially looking for as well as a number of other indications like leading indicators, the levers, etc.

 As I have often shown, the leveraged ETFs seem to give stronger signals earlier, this is BIB, the Ultra-long NASDAQ biotech ETF, note its 3 min chart looks a bit worse.

And the long term 4 hour BIS, leveraged Ultra Short NDX biotechs has a strong 4 hour positive divegrence.

When the 5 min chart fails, I think IBB short or BIS long will be very interesting, however as far as the divergences, they aren't too different than the broad market as you might expect as the broad market accounts for the greatest directional influence on just about any stock with Industry groups being the second most influential, the point being is the broad market updates are probably going to be showing just about the same thing as something like IBB.

AAPL Update

I'm covering AAPL, not because I really want to and see something I really like here, but because we have earnings tomorrow for their fiscal Q1 after the close and it's an influentially weighted stock on the NASDAQ 100 / QQQ.

 Looking at AAPL's chart with a 200-day moving average (blue) and a 50-day moving average (yellow), you'll probably notice the 200-day moving up and the 50-day as of right now, moving laterally, that should be a giveaway in itself if you didn't already pick it out on the chart, "Range".

Taking a closer look, you have a pretty clear resistance "area" around the psychological magnet (whole number) of $115 which just adds to the case for a head fake move.  If we went no further than this chart and didn't have any idea where the probabilities were as far as AAPL perhaps being accumulated for a much larger run higher or distributed and an expected move lower, the fact would still remain that Technical Traders are predictable in their actions when faced with certain situations like a clearly defined range and the more popular the stock, the higher the probability that some kind of head fake move will take place based on the range and using the predictability of Technical traders' reactions against them. I could dole out a scenario in which a head fake move could be used here in either an accumulation or distribution circumstance.

A lot of technical traders will only enter positions on price confirmation, say a breakout ABOVE the range at the coincidental psychological level of $115 (as a whole number that tends to attract our attention subconsciously). Professionals are well aware of Technical Analysis and how technical traders will rect long before the orders even show up in the book.

On a fundamentals basis, I don't have much to add as to AAPL, but I will say that the market is largely driven by perception, whether smart money looking at a great earnings report and poor guidance and selling off the asset because it looks like no matter what the company "did", the only thing that's important are the perceptions of what they will "do" moving forward.

From a dumb money point of view, earnings can blow be horrible and the perception that the instantaneous price reaction creates, defines the perception, the awful NFLX earnings recently are a great example of that. If you read the entire earnings report, at least I would not have expected NFLX to rally like that on that kind of a report, but as we have recently discussed, often the perception of the earnings report is created by the instantaneous price reaction, again see NFLX.

 Looking at the Trend Channel (weekly), I'd say a move below $104.65 on a 5-day closing basis, would be a significant changes of character in the trend. Otherwise, the Trend Channel has held the entire uptrend of 2014 without a single stop out.

From a multi-day 3C chart basis, we can see the 2012 distribution and top call we made back then that led to a -45% decline and we can see a double "W" bottom with a positive divegrence. The inline nature of 3C during the uptrend has been on the strong side, but recently it has moved to near exact reversion to the mean, still an overall positive looking trend, but clearly a change in character.

On a very long and strong 6 hour chart, we can also see that change in character from a relative negative divergence (weaker for vs leading, but still very strong on a chart this long) and a leading negative divegrence developing just after. This is a longer term look using multiple timeframe analysis, however if you look within the leading negative divegrence, you have a weaker, but still important relative positive divegrence at an area that also forms a "W" base and is in the range which draws a lot of attention and is ripe for a head fake move. Overall it would seem to me that there's a definitive change in these very long term charts toward the negative, however that head fake move above the range would be very enticing to me if I were pushing the buttons on short term price action. This "could" also set up a nice short trade that comes to you, of course we'd want to see evidence that there's distribution in to a move above the range, but that range sitting there is such a popular stock looks like a very high probability set up.

 On a 2 hour chart which is still exceptionally strong and important, the same change of character is seen as we saw above on the 6 hour chart and to a lesser extent, the slower to react, but very strong 2-day chart.

Note the relative 3C divergence in to the recent highs and a new lower low in 3C (leading). However we also have the same relative positive divegrence at the same area as the 6 hour chart above forming a "W" like base.

My suspicion would be for a head fake move above the $115 range, I would also suspect distribution in to higher prices and demand as technical traders buy on a confirmation breakout move.

 Looking at a 15 min chart which is far more detailed and still a very strong timeframes, it looks like there's a clear "W" base set up in that range, there's a slight negative as the $115 area is approached. Unless something has recently changed in AAPL expectations that were causing distribution of the base area that appears to have been put in place, I'd suspect this is to just back price off and not have a psychological trigger like $115 effectively trigger an early start or false start before earnings.

I see this same signal to an even stronger degree in the more detailed, shorter term 10 min chart, the white positive divergence would be the second base in the "W" bottom, again, unless something has changed since the 16th, I suspect this is to prevent a false start on a move > $115.

The 5 min chart shows the same thing as well.

Even the intraday 1 min chart shows a leading negative trend, but again, I suspect this is to prevent any false start above a psychological level.

The one thing that bothers me about these charts are the 10-15 min charts, those are pretty serious timeframes, not typically the kind of "steering" timeframe one would normally see to prevent a move just over $1 higher. I still suspect the highest probability is a break above $115. 

I also suspect based on the longer charts like the multi-hour (2 hour/6 hour) that there's a good chance the breakout is used as a head fake move, meaning sold in to. We can only get that kind of confirmation once we see such a move, but if that were the case, then depending on how strongly the charts moved, there could be a good case made for a trade that essentially comes to you. If those changes of character which are even evident on the Trend channel and price itself are telling us something, I'd lean a lot more toward distribution in to a move above $115 and potentially a trade (short) that could be entered in at a better price and as such, lower risk.

As an aside, we have seen some pretty unbelievable moves right in to earnings, GOOG gave a very strong signal only 15 minutes before earnings several years ago that ended up being key to the direction it took, call it a leak, call it price manipulation, but it was screaming.

I'd rather sit back with AAPL and let it tell us what it is doing and from there, make a determination as to whether there's a high probability set up that comes to you.

USO / Oil Update

You may have seen the piece in the A.M. update regarding OPEC's general secretary Abdalla El-Badri said oil prices could reach $200 a barrel if there's a lack of investment following this price slump. This sent oil up a bit early this morning, however I don't think this is what we have been watching develop.

Again, I DO NOT think this is a primary trend change in oil/USO, I think it would need a significantly larger base and have quite a bit of work to do to get there, but as a counter trend move/short squeeze, I suspect we are very close to that possibility.

 On a daily USO chart (very strong timeframe for a 3C chart), you can see the leading negative divegrence (which on a daily chart is a strong signal) and that is followed by a downtrend in oil. It's interesting how "Insiders" seem to be prepared for large moves like this months in advance. In any case, the point really is the current 3C action vs price shows there's just not enough evidence or any evidence to suggest that any move higher, no matter how strong it may be if a short squeeze is engaged as I would expect to happen, is a major tend change. You've seen how long a basing process can take and how much work goes in to them, this is no where near those kinds of examples we have seen over and over again.

However, I do think USO has a very strong probability of a move to the upside , engaging a short squeeze and that may be taken by some as something more than what it is, which in turn could set up the next position (back down), but I'm getting way ahead of myself, we'll have to see what the charts look like when/if we cross that bridge which I expect we will.

 As usual with changes in character, we often see changes in trend and the increased ROC to the downside which is evident in strong leading negative 3C action on the chart above this one (daily), leads in to the gap down and then the increased downside ROC in price which leads to a trend change, at least short term which would be lateral.

The increase in volume around the gap down and after also looks like a probable short term capitulation event or short term selling climax.

 On a 60 min chart we can see the lateral price action and what looks like a "W" base that is near maturity, which I actually prefer over an earlier "V" base and potential move off a "V" base which I don't think would offer the kind of support USO would need to get of a sound counter trend move, knocking shorts out in a squeeze.

I did mention last week that the flat range is likely going to attract a head fake move below local support as we see this about 80% of the time, roughly speaking, just before a reversal for a number of reasons. I do not see the recent penetration of support as a head fake move, volume didn't respond in such a manner to suggest stops were hit or that a significant bear trap was created on a break of local support so this is something to be on the look-out for, it obviously doesn't have to happen, it just tends to be a higher probability the more defined a support area/range becomes and it tends to happen right before a reversal (to the upside in this case).

We do have a pretty significant positive divergence out to 30 min charts...

The 30 min chart transitioning from in line with lower lows in price to a positive 3C divergence with a higher 3C leading low.

 However it has ben the more detailed 5 min charts showing the more interesting action, especially recently with a leading positive divegrence.

On a near term (timing) basis, the 5 min chart looks to have put in another positive divegrence, looking like it's getting ready to start a move higher. It's difficult to say how much larger the divergence "could" become, but I still suspect this move for now is going to be a counter trend short squeeze before we get in to anything potentially more serious and longer term in nature.

Also the 3 min intraday chart which has been in line on what looks like a "steering" divergence to create the "W" bottom is positive in the area. I still like this as a speculative long play, looking for a short squeeze, but again I'd warn that even with very strong short squeeze price action, not to be fooled in to thinking there's a significant enough base to support a primary trend change.