My pattern work in nearby crude oil argues for more weakness after this little bounce off of the $58.00 area (into the $62.50-$63.00 area max). If weakness resumes as anticipated, then oil should head for new reaction lows in the $55-$53 target zone to complete the first downleg in the aftermath of the recovery rally from the January low at $32.70 to the June high at $73.23. Let’s notice that both the weekly momentum (relative strength) and weekly stochastics are pointed sharply lower, which is a warning signal that renewed pressure should be forthcoming in oil prices – and the U.S. Oil Fund ETF (NYSE: USO) in the near future.

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.