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Crude oil has been in a short-term declining trend since the beginning of November. Big picture: it is in a large trading range. After spending so much time being beaten down, it’s finally making the turn. This looks more promising than the last rally as the PMO didn’t confirm it.
Price hasn’t managed to pull out of its declining trend channel, but today’s big gap-up move suggests that it might. The indicators also favor a breakout. The relative strength index (RSI) just moved into positive territory and the PMO triggered a crossover buy signal today. The stochastic oscillator is also confirming, as it rises again toward positive territory above net neutral (50).
We also follow the Cboe Volatility Index for crude oil ($OVX). As with the Cboe Volatility Index ($VIX) on its inverted scale, we look at where it is in relation to its moving average to determine internal strength and weakness. Currently, it’s oscillating above its moving average which implies internal strength. We also would like to point out that we could be looking at an intermediate-term double-bottom forming.
The iShares 20+ Year Treasury Bond ETF (TLT) also saw a new PMO crossover, but to the downside. This PMO sell signal looks dangerous as it’s coming in very overbought territory. The correction in interest rates is over, in our view, so we expect TLT to return to the strong support zone at the November lows. Price managed to close above the 50-day exponential moving average (EMA), but it’s barely hanging on. The RSI moved into negative territory and stochastics are dropping vertically. This appears to be the end of the rally in TLT as the 20-year yield recovers.
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Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master’s degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor’s degree in Mathematics from the University of Southern California.