Last week, the price of oil declined back to $105 after $110 continued to provide resistance. Oil is still consolidating between the $105 and $110 per barrel zone, but a breakout appears to be likely in the near future.
Based on the chart, odds favor the bulls. But news from overseas, as well as from President Obama at home, could sway bearish investors back.
A great article from Barron's summarized a few bearish points against oil.
"Here, chatter out of France that industrialized nations may release more of the commodity from their strategic reserves was a factor. Crude settled down 1.8% at $105.35 a barrel. President Obama's much-awaited speech in Cushing, Oklahoma featured a political attack on those who worry about higher oil prices, imputing purely political motives. It also featured an attempt to inject some realism into consumers' oil-price expectations: "[T]he fact is, producing more oil at home isn't enough to bring gas prices down overnight," he said. As expected, the speech greenlighted the southern portion of the Keystone XL pipeline. The iShares Dow Jones U.S. Oil & Gas Exploration& Production Index Fund (NYSE: IEO) lost 3.3% to $65.99 in late-Thursday trade."
Oil prices are one part of the market that may tip us off, and give us warning not to buy the dip this week. Over the past several months, I mentioned how financials will likely dictate how we position our trades. And I will continue to use banks to gauge market direction, but they are not the part of the market that I will be watching for the remainder of this week. The following video reviews the United States Oil Fund (NYSE: USO), which may provide us with an early warning about where the stock market may move.
Editor, TradeMaster Daily Stock Alerts
Editor's Note: Jason's trading service, TradeMaster Daily Stock Alerts, just had another banner year. But recent optimism has him leaning bearish. Learn more by clicking here.