[USO] model update

In the backlink I showed the recent USO rally as being impulsive.  While I think that oil will push higher in the next week or two, my new model suggests that this will be a corrective rally.  The primary count is in red and alternate count in green.  For the primary count, the breakout of the downsloping top rail would be C of [4].  If that happens I would sell into that strength because one should always be wary of a 3 wave move to the level of the prior 4th.

There are two reasons I am changing my count at this point.  First, I was never really comfortable with thinking that a sustainable bottom would occur on a falling wedge because I now believe that WX is a real principle.  So I now count that falling wedge as W3 of C.  Additionally, the action since the first bounce peaked looks very much like a triangle or other type of B wave is forming and it is midway to the level of the prior 4th.

Having said all of that, I have seen this game before and the small wedge seems too small to be W3 of the whole C wave.  It might turn out to be W3 of W3 of C.    You can see how the above red path would form yet another, yet much larger falling wedge.   A wedge that size would provide higher confidence that [W3] of C was actually in.

Bottom line: I think USO and all things oil have a nice rally in them but then prep for lower lows.  Those lows would either be [W3] of C or in fact WC itself.  So if USO hits $12-13 then it is certainly a buy with a very large % rally (for oil at least) to ensue but with the possibility that there might be one last and final sell off following that bounce.  This is too far ahead to really waste time charting but it certainly is worth thinking about in advance.

Short term, buy oil if

• It finishes a HT per below OR
• It breaks out that top rail OR
• It collapses per the green model to the bottom rail