January 18, 2007


Nothing really new on the TLT and GLD front.

For a time, it looked like the alternate scenario (short term bearish) described in the previous post might come to pass but after a quick dip to 60, GLD is back to where it was. A decisive breakout above 64.55 is still needed for the strong bullish scenario to play out.

TLT is still hovering above support at 87 so no signal either way there.

One of my trading mentors used to often yell "Never try to catch a falling safe" while nervously pacing the trading floor. I've also heard it as "never try to catch a falling knife". Either way, the saying applies perfectly to USO, the oil ETF whose chart is shown above (click to enlarge).

With that wise advice in mind though, it seems to me that buying some USO here would constitute a low risk/ high reward play. The RSI is in oversold territory (around 20) and turning up. Today we tested yesterday's low below 43 before closing above 43 on humongous volume (volume the past few days has been about 5 times normal volume). Also, for those Japanese Candlesticks lovers out there, yesterday saw a bullish engulfing pattern.
All this to say that now would be a good time for USO to stage some type of rebound. Sentiment-wise, unless OPEC annouces a production increase I don't see how the news could get any worse at this point.