A Possible Oil Bottom

As I looked through charts tonight (Wednesday), the big standout was the big volume spike in USO (USO), the US Oil Fund ETF. Oil has sold off relentlessly since July, and price currently sits way below the 200 day moving average. We have seen generally higher volume during the past week, and extremely high volume today. The ultralong oil ETFs will look especially good if we can break up through the trendline on heavy volume.

If oil continues to rally from this point, oil services stocks will likely benefit. Oil Services HOLDRs ETF (OIH) has been moving steadily higher on heavy volume during the past four sessions.

Looking at the broader market, we are overbought, but the buyers are still in control.

So the basic conditions appear to be an overbought market with a potential bottom in oil, along with strength in other commodity areas. Shippers are looking strong, and appear to have more room to run. Excel Maritime Carriers (NYSE:EXM) is an example:

Also look at Genco Shipping & Trading (NYSE:GNK), TBS International (NASDAQ:TBSI) and Dryships (NASDAQ:DRYS). If we get a general commodity rally, all should continue higher. I will be avoiding long trades in non-commodity sectors for the most part, and looking for potential shorts. Retail is at an interesting juncture, particularly considering the possibility of higher oil. I would expect a pullback soon.

Financials were relatively weak today.

- iShares FTSE/Xinhua China 25 Index ETF (FXI) has higher highs and higher lows in place. I would like to see it pull back to the 28.00 area for a better entry.

- Focus Media Holding (NASDAQ:FMCN) is a Chinese advertising company that is looking good off of the lows.

- Yingli Green Energy Holding (NYSE:YGE): This Chinese solar company is also looking like a good bottom fish.

- Pan American Silver (NASDAQ:PAAS): This silver miner has consolidated at the lows, and shows good volume patterns.

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