December 10, 2015
As we reviewed the oil charts this morning, it became apparent that many technical factors are beginning to align that may give the bulls some room to run. The “Drudge Indicator” is flashing, and the general population has a suddenly expansive knowledge and understanding of the oil economy and its underlying supply and demand trends. As any family member can tell you over the holidays, Saudi Arabia will continue to flood the market until all others have gone bankrupt, and oil will of course trade down to the $20’s. Right. We all know how things like this tend to play out once the direction is “absolute” and “clear”.
The three charts below of WTIC (spot price of light crude oil), USO (oil ETF) and UCO (2x oil ETF) all show the same thing. Not a surprise, since they’re based on the same underlying asset. But it’s important to review them individually for clues. What you’ll see is the following. The volume has absolutely skyrocketed during 2015 and shares have formed a falling wedge pattern (generally bullish, as new lows become less and less pronounced). And that comes while price is showing massive positive divergence from RSI and MACD. What that means is that price is forming lower lows while the technical momentum indicators are forming higher lows. The downward momentum is slowing. This, along with the massive volume into the lows, may be a sign of some serious accumulation by the largest institutional investors into the asset class.
UCO (ProShares Ultra Crude Oil)
USO (US Oil Fund)
WTIC (Spot Price of Light Crude Oil)