Technical and Fundamental Analysis on US Oil Fund

USO, the US Oil Fund ETF, invests primarily in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels. Essentially, the top 6 holdings are crude oil futures from May to August--which, like futures, will continue to roll out and into the next month as contract months expire.

The month of May has seen a tremendous about of ouflow of funds in US oil. YTD total return for investors is -11.47%.

Energy, gas and oil are the underperformers this year and a main reason many call for deflation, recession or at the very least, end of accelerating inflation. What we do know as commodities traders, though, is that there are emerging trends, existing trends and trends that are on vacation (which could last months or years).

Which trend is US Oil in?

On a monthly chart, USO is not stacked, as I have shown you with other sectors. In other words, the 23-month moving average sits under the 80-month MA. That tells us that, even in 2022 when the price was over both MAs, the phase never really turned bullish.

Now, in 2023, USO is under the 23-month MA, signaling more of a recession as many economists talk about. However, on the Daily charts, March brought USO to a 2-year low.

In May, we see an exhaustion gap, provided the low of 59.70 made on May 4th remains intact. Monday, USO had an inside day, trading inside Friday's range. The Real Motion momentum indicator shows a bit of a bullish divergence as the red dotted lines head closer to the moving averages. That makes the case for a possible rally should USO's price clear the 50-DMA (blue).

Summer season is about to start. The US Strategic Oil Reserves are low with stock in crude oil at 40-year lows. The plan by the US is to refill the SPR in the 3rd quarter of 2023. I'll leave it here.

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ETF Summary

S&P 500 (SPY): 23-month MA 420. Russell 2000 (IWM): 170 support, 180 resistance. Dow (DIA): Now below the 23-month MA. Nasdaq (QQQ): 329 the 23-month MA. Regional Banks (KRE): 42 now pivotal resistance; holding last Thursday's low. Semiconductors (SMH): 23-month MA at 124. Transportation (IYT): 202-240 biggest range to watch. Biotechnology (IBB): 121-135 range to watch from monthly charts. Retail (XRT): 56-75 trading range to break one way or another.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education