Corrective Rally in USO Likely In Progress

Again, I want to begin by reviewing my bigger picture in the USO:

For all of 2018, we have been dealing with overlapping structures in the USO which have provided many starts and stops to structures that have developed and then invalidated.  My premise since we have struck the bottom back in 2016 is that this rally is part of a corrective rally off the lows.

If you look again at the monthly chart I have attached, there are two premises I am tracking.  The first, as presented in yellow is that this rally is an (a) wave of a larger (a)(b)(c) structure, which can take us into the early 2020’s until it completes.  Yet, this structure should see a bigger (b) wave pullback.  And, for now, I am wondering (out loud, if you will) if this (b) wave coincides with the 20-30% correction we expect to begin in 2019?

The other structure I am watching is that this rally has been a corrective 4th wave, which will lead us to a lower low in the oil market.  And, at the end of the day, I cannot see much of an edge to either of these potentials.  But, if I had to lean towards one over the other, I would probably lean towards the yellow count.

So, in dealing with corrective structures, we have to recognize that they will see many starts and stops, and will seem manic at times.  That is what corrective structures do.  For this reason, I have stated many times to the members of my live video that this is not a chart I desire to trade.  I would much rather focus upon charts that have clear structures, which require much less “guesswork.” 

With the further rally we have seen this past week, it is making it much more likely that the USO has begun its b-wave rally. 

As you can see from the attached 144-minute chart, I had added a box for an (a) wave target.  Most often, the (a) wave of a b-wave rally will target the .382 retracement of the prior a-wave decline.  That is the 11.70 region in our case.  However, when dealing with commodities, it would not be unusual to see it extend all the way to the .500 retracement point, which is the 12.50 region.  That is why my target box overhead resides between those two regions.

Avi Gilburt is founder of