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Monday, December 07, 2015

Is Oil Set to Bounce?

The following 5-Year Daily chart depicts Light Crude Oil (as the primary instrument in candle format) and the S&P 500 Index (as the secondary instrument shown as a black line). There was a drastic shift in sentiment between these two markets when they began to diverge in mid-October, 2014.

While the price of Oil is making lower swing lows in its depressed downtrend -- and, in fact, made a new 5-year low today (December 7th) -- the RSI and PMO indicators have been making higher swing lows but have yet to make higher swing highs. So, while we're seeing possible hints of higher prices to come at some point in the future, it may be awhile yet before prices begin to stabilize, first.

High-than-normal volumes this year haven't yet produced stable prices and may have contributed to the large swings in between 37.50 and 62.50 that we've been seeing. Until we see a sustained drop in volumes, we will likely see Oil continue to plunge to further new lows and/or persist in its wild daily erratic bearish and bullish spikes.