Oil re-testing support so watch for a potential failure

Time to look at oil again! As I tweeted yesterday, it was looking heavy based on both the cash ETF - USO - as well as the gasoline ETF, UGA, moving under Wednesday's low. A few weeks ago I'd commented that we needed to be alert for a retest of the 2008/2009 lows, even if it moved higher first. Well, oil did manage a nice high clearing above the .382 Fibonacci retrace level of $78 in $WTIC, and almost toward $90 (where approximately $92 would test the .50 retrace to the $147 peak). So now it's time to be alert for a failure of support and significant I've down. While it isn't absolutely guaranteed, it's moving into a weak cycle time, and take a gander at how my charts look now. On the daily, it bounced heavily from lower channel support, but could fall under that on a retest (overnight futures now being quoted down around $73 area). Failing the low $70's and under $69 renders it more vulnerable; it needs back over $78 to regain strength (hence a possible buy or stop area if trading it defensively).

My monthly chart also shows oil at an interesting test area. It's been crawling up that one trendline, still threatening to lose that support! The monthly chart indicators have also cycled down. While I'm not sure what "fundamental reason" will appear to "justify" lower oil prices, the technical and cyclic picture is that oil prices do look vulnerable to re-testing the lows. So at minimum, don't be surprised if it happens!