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“When you’re in the news business, you always expect the unexpected”. These are the words of the renowned journalist Helen Thomas. We would also add “In the trading business”, as the last week’s scenario of the market breaking all time highs in current market conditions was unexpected among the vast majority of the trading community. Well, it did happen, with a weak starting point related to the unstable political situation in Capitol Hill             and the outstanding distance the market has already traveled this year, it yet managed to set, once again, an all time high.
Postponing the debt ceiling by 3 months is analogous to simply kicking the can down the road, along the upcoming tapering of the FED, didn’t shade by any means the euphoria that seems to flood the market. We as traders should not be concerned about all of these political/economic details, we should only follow one thing, and that is price action - The market is in a clear uptrend, all indicators point higher and that’s the direction we should trade within.
Last week we mentioned that the market has clearly bounced from the DIG Smart Points lower band, twice in the last two months (DIG Smart Points is a proprietary indicator developed by and available as a subscription indicator on TradingView). This week the price has traversed through the mid yellow band, indicating that the market might reach an exhaustion point where the prices might be going sideways for a short period of time or even down for a small correction. For now, we are still considered to be at the previous high’s resistance area where we could see one out of two scenarios - This is either a false breakout, and from false breakouts comes fast moves downward. Or, we could see a further, slower upside movement. We would tend to watch more for a failed breakout just to see a slight correction in prices, as it seems that the market needs to digest the recent green spike sometime.
Identifying the support level in this chart is quite tricky as the the next technical support level is quite far, $164.50. Obviously there will be intermediate levels in between. We look onto the mid yellow DIG Smart Point band as a natural candidate for a slowing and consolidating price action. As one can see from history data this proves to be true for long periods of time. Sometimes it acts as a classic support resistance level where prices “bump” into and eventually breakout from, and sometimes price ranges and volume shrinks in these areas, a sign of an equilibrium among buyers and sellers.
The USO , US oil             ETF seems to be consolidating over a small range of prices with diminishing volume , a chart that might indicate a possible breakout. To our view this breakout would probably be of the lower range level ($36.40) rather than the high level ($37.60). This behaviour is a continuation of a weak price action over the last 2-3 months. Oil             had few failed breakout attempts, and now the momentum seems to be on the sellers side. Upcomming support level for the USO in a case of a breakdown will be the previous resistance level where we broke out from - $34.90 ~ $35.00

Economic Calendar

Oct 21 @ 10:00 AM - Existing Home Sales.
Oct 22 @ 08:30 AM - Unemployment Rate.
Oct 24 @ 10:00 AM - New Home Sales.
Oct 25 @ 08:30 AM - Durable Orders.
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