Oil Reverses to the Downside

Let's notice that after rallying strongly yesterday and recovering to test resistance around $88.00, crude oil prices have reversed to the downside again and have pressed to a new reaction low at $85.63.

Yesterday's upside failure confirms the importance of the $87.80-$88.00 resistance plateau, and today's resumption of weakness provides further technical evidence that oil prices -- and the U.S. Oil Trust ETF (USO) -- are in the grasp of a correction off of the Dec-Jan top formation. The correction projects to an $82.00-$80.00 near-term target in crude, with downside "overshoot" into the area of the January 2009 trendline, now at $80.66.