More Weakness Ahead for Oil

Purely from a technical perspective, two aspects of the big-picture chart analytics pop out at me. One, oil has violated its major support line off of the December 2008 low at $32.48 on the weekly NYMEX chart, which cuts across the price axis at $85.18. Secondly, my weekly momentum gauge confirms the lows, which warns us that more weakness is ahead despite any indication to the contrary offered by a recovery bounce.

Right now, my work argues that the next decline will press NYMEX oil towards a retest of the October 2011 low at $74.95.

Let's move over to the weekly chart on Brent Crude Oil, which is oil produced in the North Sea as opposed to the U.S. From a technical perspective and net of any geopolitical shenanigans that goose the price of oil, the one-year double-top formation in the $127-$128.40 area has measured downside targets at $82.00-$81.00, and then in the vicinity of $72.00-$70.00.

ETF traders may want to watch the U.S. Oil Fund ETF (USO).