The price of oil has been retreating the past few days and it is important to know if it's a move starting from daily chart moving averages or weekly chart moving averages as the latter is a much more serious situation.
It can be seen that this is a weekly chart moving average push down that is beginning (using the USO (NYSE:USO) chart since it has liquid options). Looking at the top two charts, the left is the regular view of the two moving averages showing the smaller red moving average being pushed down by the larger green moving average on weekly bars. The chart to the right is a focused view of the same chart.
The lower two charts show that it is not only a weekly moving average push down but it is also a weekly upper channel line failure that is pushing the price down. The chart to the lower right shows a focused view that I converted to daily bars for a more precise view.
How much lower oil will go again no one knows but a new leg down has already begun. As everyone knows, oil has been leading the stock market up and down by its nose for some time now because of the detrimental effect on banks should oil companies start filing for bankruptcy.
On Friday there was a large drop in oil that rattled the stock market in the morning but it was quickly driven up in a fierce short squeeze as the prop the market coalition took advantage of the thinly traded Friday to attempt to decouple the stock market from the price of oil. Then in the afternoon when most Wall Street traders are already gone for the weekend they turned up the heat because they were essentially unopposed on an empty playing field. Whether or not they can make this one day decoupling stick will be the big question on everyone's mind next week. If they can, it is very possible that the indices may break up out of their restraining one and two year channels. If they can't make the decoupling stick then the stock market will likely follow oil lower once again.