A Test from Above

The nagging weakness in crude oil is gaining more attention by the day, as "Black Gold" has been acting more like, well, gold-gold, in recent weeks.

Our attention, frankly, has been focused more on the intriguing and impressive strength in natural gas, both in absolute terms and of course relative to crude. In fact, as crude has made six/seven-month lows this morning, the UNG ETF for natty has thus far ignored any inclination to fill a massive downside gap created by Monday's surge. 

The easiest conclusion to draw is that a new trade in the energy complex is catching steam: Long natty to pair off against Short crude. Whether or not that pair trade continues and perhaps becomes crowded down the road remains to be seen. 

But the inability of crude to bounce from oversold conditions of late, especially, has been concerning. And meek bounces in the XLE OIH ETF names also puts most energy stocks, with some exceptions of the natty-related names, in the penalty box for now in terms of taking them for swing longs. 

Perhaps the best case now for a crude bounce or bottom would be the weekly USO chart, below, where we see just how important the $13 level has been for this ETF dating back to 2015. Failure here opens to the door to a further washout, as the stakes are higher than ever for crude to stabilize. 

Elsewhere, equities seem to be putting in a fairly benign digestion day after yesterday's massive rally. Earning blow-ups like ROKU WYNN are not erasing the ETSY TWLO joy of yesterday.