Misfire!

We charted the potential crude oil false breakdown last week on social media and with Members. However, given the upside follow-through we are seeing today it seems instructive to acknowledge it here. 

On the USO ETF daily chart, below, we can see multiple attempts to sustain a fresh breakdown in oil in recent weeks, especially given the Venezuela news and how much the President is touting lower gas prices with his desire to see them lower yet. 

However, a funny thing happened on the way to what seemed like another "obvious" breakdown in oil from an overall sloppy chart: Oil bears misfired, as the selling stopped on a dime last Thursday, reversed higher, and has not looked back since. 

It is often said that from failed moves in one direction come aggressive moves in the opposite direction. Naturally, context for that saying matters, as it is not always the case. Here, oil has been incredibly frustrating for crude bulls for an extended period of time. Even as the oil services stocks in the OIH ETF began to noticeably improve, as we noted here and with Members in real-time, crude itself would continually slip each time it appeared to be firming up with the OIH names. In effect, the lousy oil price action has kept a lid on the oil sector at-large, despite promising action in a fair amount of oil stocks. 

But that should change dramatically if and when oil breaks out of its slumber. Today's pop in oil is a step in the right direction to prove the recent weakness was a bear trap/false breakdown. But more strength is needed, likely with a move above $75 and hold on USO. 

Still, I strongly suspect oil will eventually have its time to shine in a world where both The Fed and White House (and Congress) continue to blow off inflation which has remained above The Fed's own 2% target for fifty-eight (!) consecutive months--It is not that easy to escape inflation, despite how many pundits, politicians, central bankers, elites, and condescending market analysts think they can just talk it away.