$USO ETF Failed Ceiling Test, May, June Oil Future Below Support, Traders Grab Volatility (USO, CLK10, CLM10, CLN10, $WTIC, $USD, $OVX Charts on 4/16/2010)

The risk trade (stocks, commodities) rolled over on Friday using the Goldman fraud charge as a catalyst. I looked at $USO (Oil ETF) and the May, June and July oil futures on 4/14 and it was interesting that USO failed at ceiling resistance while May, June and July oil futures broke out and failed on Friday (July looks better). Traders dumped risk or de-risked their portfolios, grabbing volatility, US Dollars and Treasuries.  I'm continuing from my original oil post with new charts.  I'm waiting to see when USO and near-term oil break out of this channel or at least re-test resistance. 

While tweaking off Turkish coffee I cooked up a bunch of oil charts on the fly. Check out USO and West Texas Intermediate Crude (WTIC) from the close on Friday.  $USO did NOT break through ceiling resistance while WTIC (oil continuous contract) did and it's sitting right on top of support.  You can also see the clear uptrend channel from October 2009 and the 50 and 200 day moving average not far behind.  The dotted line is currently support which will probably break tomorrow since futures are down.  We shall see though.  If you're on the index page, I also charted out May, June and July oil, the oil volatility index, US Dollar and the recent USD/WTIC correlation. 

$WTIC - West Texas Intermediate Contract  (Courtesy of Stockcharts.com)

USO sold off at ceiling resistance and still in this dang channel.  It's also in an ascending triangle from the March low.  The 50DMA and 200DMA are close by.  See the second chart for closer view.

$USO Long Term Chart

$USO Short Term Chart

Now for the underlying oil futures, May, June and July (CLK10, CLM10 and CLN10 respectively).  These charts are courtesy of OptionsXpress.   As of 10:07pm central oil futures are down 1%+.  The futures look similar to USO and $WTIC being inside a wide uptrend channel.  All contracts took out the near term uptrend and fell through the recent floor.  May oil is testing the 50 day moving average and June oil is just above it.  July oil is holding up better technically, it's holding onto to the cliff with one arm.  The contracts are in decent contango May: 81.76, June: 83.41, July: 85.  When will front month oil spike and tip the curve into backwardation?

CLK10: Crude Oil May 2010 Future

CLM10: Crude Oil June 2010 Future

CLN10:  Crude Oil July 2010 Future

Lastly, look at the oil volatility Index and US Dollar Index since everything is related to the underlying in a way.  $OVX is at the January low (27.16). The oil volatility index hit 100 in December 2008! The US Dollar Index has been flat since March after the strong run from December.  Recent price action is diverging with the MACD (momentum indicator at bottom), however, it broke back above the 50 day moving average and is testing ceiling resistance.

 $OVX (Crude Oil Volatility Index)

US Dollar Index ($USD)

If the US dollar keeps rallying will it keep a lid on oil?  Take a look at the recent $USD:$WTIC correlation.  They've been trading in tandem so the inverse correlation trade is not working that well, but that can all change if it wants to. Thoughts??

US Dollar v. W. Texas Crude Oil

[Charts courtesy of StockCharts.com]