Oil Rally Running On Empty

One of the things that I like to look at is volume correlation. When you correlate price with volume, it can provide some interesting relationships. The above chart is the 5 year weekly chart of United States Oil ETF (USO) - a proxy for crude oil. It’s easy to see that recently it has been rising on lower volume. The most recent week has risen on 55mm shares. Contrast that with the declines in January/February averaging 180mm-200mm shares.

USO is trying to push higher but so far it does not appear that it has the volume to accomplish the move higher. It’s trying to move higher on 1/4 of the volume. I’d look for oil to move sideways and then embark on a downward trajectory again.

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