Markets 16 - 19 Feb 2016

If we're going to, in the context of the market selloff and overall global deleveraging of assets, look for longs at the open of next week's trading session (Monday is a US market holiday), we need to know how much more upside is there in oil.

Oil, after all, is the only green light markets have in an avenue of indicators signaling "bleed."

If you're going to buy anything based on oil, look at buying at the CL 27.60 level but keep in mind you only get one shot. Price rallying to any of the high time frame resistance levels listed on the chart below means 'stop looking for a longs' and be ready to sell at the first sign of price capitulation on a lower time frame chart.

Double dipping levels against a strong trend will transfer your trading capital directly into the account of those on the opposite side of your trades. 

Oil: Weekly Chart

My argument against upside pressure for Oil, beyond 33.00, considers the heft of the selloff, the overall downtrend, and too little shortage of supply. Oh, oil has double bottomed at 26.00? Well, a lot of traders (probably long oil) are mentioning that so let's look at what, exactly, oil double bottomed into.

Oil: Daily Chart with exposed double bottom

 Above we can see the touted double bottom, which has created a trading range between 27.00 and 30.00.

Oil Monthly Chart

On the big daddy monthly chart, however, we see that oil price, converging on 22.00, has not only crushed and refused to rally at the origin of its 2004 breakout, it's pushing into a level where markets took a very long time to decide price should go higher.

Further evidence that there will be very short term upside gains, if any, in oil is the US dollar where I expect, aside from direct Fed molestation, buyers to give sellers a beating at 95.00.

DXY Weekly Chart. Caveat: dollar upside could depend on Gold, rather than an inverse correlation with stocks. 

I'm not saying 95.00 is going to be Gettysburg for Dollar sellers, but markets likely remember that DXY closed above par in November 2015. That's going to mean something, for greater US dollar upside, and I think 95.00 is the battleground where sellers could lose. Yes, I know I am somewhat contradicting myself considering all the noisy price action to the left, but...

US Ten Year Yield Monthly Chart

unless treasury yields are going to rally here, which is unlikely without Fed intervention (what are they going to do, raise rates?), I don't see further USD downside or oil/stock market upside beyond short buy side trading opportunities into resistance levels to place sell orders in conjunction with the downtrend.

Question or comment below. 

Happy trading.