I'm going to use the USO -- the ETF that tracks the oil market -- for today's writeup.
Click for a larger image
The oil market has been dropping at a strong pace for 8 months now. Notice all the SMAs are moving lower with the shorter SMAs below the longer SMAs. Also notice there have been 6 bear market rallies where prices attempted to move higher but ran into upside resistance at an SMAs. Finally, notice the divergence of prices and the MACD over the last 4 mopnths.
On the daily chart, prices gapped down big a week ago on Tuesday. Since then prices have been trading in a fairly narrow range. Then yesterday we say price sbreak out on strong gasoline demand.
At some point markets stop moving lower. Oil is now incredibly cheap. However, price is usualy the worst measure of when to buy something. That is -- pure valuation is one of the worst timing mechanisms in trading. But that doesn't take away from the fact that oil is, well, cheap as hell at these levels.
