|Along with the global economy and perceived demand, shares of the oil tracking exchange traded fund (ETF), USO, have fallen precipitously since July 2008. The downward slope of the decline has been very steep indeed. Now, however, there is a glimmer of hope that USO may be starting to put in some type of bottom.|
|FIGURE 1: USO, DAILY. A Fibonacci fan shows the extreme downward movement of USO since the market peak.|
|Graphic provided by: Wealth-Lab.|
|Looking at Figure 1, you can see that I have drawn a Fibonacci fan between the July 2008 top and the August 2008 reaction low. There are other obvious points that the Fibonacci fan could be drawn with that could well hold importance in the future, but seeing as how USO has stayed nicely below the fan, I think it is valid to ascribe importance to it at this time. On four instances, USO has tested the 38.2% Fibonacci level, only to turn back down. In only one period did USO manage to close above, albeit briefly, the Fibonacci level.|
|Now, however, USO has managed to close for three consecutive days above the fan line. Price movement over these days has been flat, but a close above the fan line, nonetheless. This signals a potential short- to intermediate-term bottom. Should we get a bounce here, it would likely be a very mild one, perhaps even move along the lines of a consolidation phase rather than an outright bounce. Keep in mind that this only signals a potential bounce; price movement to the upside is needed before we can say that the strong bear market in oil is ready for a rest.|
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