United States Oil (USO) Steep Oil and Strong Dollar Make Toxic Brew for Global Economies

United States Oil (USO) Steep Oil and Strong Dollar Make Toxic Brew for Global Economies

United States Oil (USO) Steep Oil and Strong Dollar Make Toxic Brew for Global Economies

‘Brutal’ rally in dollar-priced crude hammers governments, strains consumers from U.K. to Brazil.

For Americans, rising oil prices are threatening $3-a-gallon gasoline and pushing up prices for plane tickets. In many other parts of the world, today’s crude rally is more painful–sparking protests, gas lines and emergency subsidies to quell unrest.

That is because many consumers outside the U.S. face a double whammy when–like now–the dollar gets stronger at the same time that oil prices rise. While petroleum is produced all over the globe, when it is sold to refiners and other buyers it is almost always priced in dollars.

To sum up the dynamic: Rising oil prices lead to disruptions which force the local government to increase fuel subsidies, which weakens the local currency versus the dollar, which raises oil prices further, which causes disruptions, and so on, until the country turns into Argentina.

So if you’re tracking the “crises move from the periphery to the core” thesis, one good guide is the flow of oil. If a country is a big net importer of oil and both the price of oil and the petrodollar exchange rate are rising, it might be the next domino to fall.

The United States Oil Fund LP ETF (USO) rose $0.02 (+0.15%) in premarket trading Monday. Year-to-date, USO has gained 8.66%, versus a 4.26% rise in the benchmark S&P 500 index during the same period.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 13.96.

The projected lower bound is: 12.71.

The projected closing price is: 13.34.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 21 black candles for a net of 6 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 45.5553. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.18. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 18 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -42. This is not a topping or bottoming area. The last signal was a buy 8 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 0 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed up 0.271 at 13.321. Volume was 33% below average (neutral) and Bollinger Bands were 38% wider than normal.

Open High Low Close Volume___
13.170 13.330 13.120 13.321 13,114,371

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 13.31 13.76 12.17
Volatility: 27 29 27
Volume: 14,796,737 18,445,982 18,089,934

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

UNTD ST OIL FUND is currently 9.5% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 13 periods.

 

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