Some Clear Obstacles Standing in the Road

As it becomes more apparent that crude oil and equities are, by and large, correlated rather closely in this market environment, both sides of the trade endure higher risks overnight. In particular, the risk of a sizable gap up or down, at random, significantly rises in a corrective market. 

So just as bottom-fishing longs are being humbled, so too are overly-ambitious shorts on a day like today, especially in front of some major events like AAPL earnings tonight, and of course the Fed tomorrow, in addition to plenty of other major earnings and macro reports this week. 

On the USO (crude oil ETF) 30-minute chart, below, there is still the potential for an inverse head and shoulders bottom over $9.40 to sustain the snapback rally and negate yesterday's weakness as a mere shakeout.

However, the tricky part is acknowledging that downtrending markets are notorious for smashing inverse head and shoulders bottom setups to pieces which, again, drives home the point about overnight risk--We favor day-trades here, for now.