Today the oil ETF (USO) broke down through the November floor. Now the November low did not hold so Crude oil continues to threaten support. The MACD has been rising on a daily chart. Everyone expects this to be a final test of the August low.
The August low was also the spike down low on the broader equity market ($SPX). Interestingly, the $SPX is trying to breakout top side while crude continues to decline. The August low was also the price low on the Shanghai ($SSEC). Why should that matter? Chart 2 below compares the USO to the Shanghai.
The crude oil market broke the March to June uptrend when the $SSEC broke down. Now, the $SSEC broke below support Friday and crude is weakening again. I view a breakout to the upside in the Shanghai index as supportive for commodities. In contrast, a breakdown in the Shanghai has the opposite effect. It is still early and we need to watch for a whipsaw, but having both of these markets break down simultaneously is cause for concern.
I'll be covering off the long term trend line break in the $CRB tomorrow on the Commodities Countdown Webinar. You can register for that by clicking this link. Commodities Countdown Webinar 20151203.
There are some bullish things that might suggest a change is in the wind for commodities. Hopefully, we'll see you on the webinar.
Good trading,
Greg Schnell, CMT
