The Crude Drop and Treasury Bounce May Be Over

West Texas Intermediate Crude, WTIC ($CL_F, $USO) was roaring higher until a ‘fat finger trade’ dropped it $7 a barrel in 3 days. And Treasury Bonds ($TLT) had been flying into early September before a strong correction that is now bouncing. Coincidence? I should think not! Look at the ratio of the WTIC to $TLT below. This ratio has been traveling in a rising channel since the middle of June. We know from hindsight that the last four days has been driven primarily by a fall in WTIC. But it happened right at the top of that channel, and so far arrested at the bottom. The chart shows a Relative Strength Index (RSI) that remains in bullish territory despite the strong move lower to a

new lower low. Take notice that until the ratio falls below 0.74 it retains a Positive RSI Reversal with a target above the previous high. The Moving Average Convergence Divergence indicator (MACD) is negative though supporting a continued move lower. Seems like the channel bottom and 0.74 are make or break territory. Keep this on your radar if you are playing either WTIC or Treasuries.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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