The bright spot for bulls is that USO found support at its longer term trend line of higher lows just above $35.50.  That’s very close to USO’s 200 day moving average which should be a strong point of support.  In addition, the past two times Williams %R has hit these extreme levels we’re seeing again now it has turned higher soon after and continued higher for weeks.

Disclosure: I’m short UCO (double oil ETF) December naked puts which are now in the money.

In addition to the moving averages and trend lines, Williams %R is getting close to an interesting point.  I say “close” because I see Williams %R as a better indicator when a stock or ETF pushes it out of oversold rather than just when it enters.  I highlighted the entry points into that lower grey area of oversold for the 14 and 28 day indicators to show how the last eight months have reacted to similar times.  Each one shows SPY move higher soon after that mark.  The unknown is if SPY will stay oversold longer this time than previously.  The canary in the mine might be the trend lines and moving average I addressed in the first paragraph.  Once the direction is chosen, I expect a quick 5% in either direction.  Hold on tight and get your trading fingers ready.  (Give a point or two in either side of my trend lines for my less than precise drawing.)

What to watch for:

• The 10 day moving average has acted as support a couple of times over the past two weeks.  Watch for it to break before getting too bearish.
• Williams %R is still overbought for the 14 and 28 day periods.  Once it breaks below this range is the time to sell be more bearish.
• SPY has a little room above the current price for it to move without breaking above the trend line, but if it does make it above and gets another confirmation day after that, I’d be more bullish.

• SLB is trading near the high end of the trend line I drew of higher highs
• SLB is trading near the highs it reached in late November and early December 2008
• SLB is quickly approaching its 200 day moving average
• The 50 and 100 day moving averages had a bullish crossover last week
• Williams %R remains overbought where it could stay for a while still

Opinion = I expect SLB to stay between the horizontal lines I drew at $45.00 and $55.00.  Those were the edges of the strangle I sold.  The 200 day moving average will be big to watch for SLB.  If it gets over it, the bull run for SLB could continue.  Along with the horizontal line I drew at $45.00, the 50 and 100 day moving averages add to the area of support down there.  Not drawn here, but I could see $50.00 holding support too.

• DIA hit the line of most of its three month intraday highs this morning
• The one time DIA closed above this line it used it as support and then failed the next day
• DIA is trading above its 10, 20 and 50 day moving averages
• DIA is in the middle of its trading channel between the trend lines of its higher highs and higher lows
• Volume on DIA has been low for weeks

Opinion = I consider the horizontal line of resistance around $81.70-81.90 as the key point to watch.  In fact, late this morning my limit order for a bear call spread hit and I sold May 82 calls and bought May 83 calls.  If it wasn’t for that line I’d expect DIA to continue its bull run based on the trading channel and trend lines.  I won’t turn bullish on DIA until that horizontal line is crossed and DIA closes above it for at least two days.

• I highlighted with blue lines the last four times (before doing it again today) over the past six months when NDAQ was touching the -100 line on oversold for Williams %R. 
• NDAQ is touching is five month trend line of slightly lower lows
• NDAQ is trading below its 10, 20 and 50 day moving averages
• The trend line of NDAQ’s lower highs is falling faster than its trend line of lower highs

Opinion = Based on NDAQ’s previous reactions to hitting such a low spot on Williams %R I think it’s ready to bounce again.  Each bounce gets lower, so this could/should be a quick trade.  Since all trends eventually break I suggest waiting to see some sign of life off the bottom before getting in.  That could be as soon as this afternoon or tomorrow.  NDAQ typically spends two to three days on this bottom line, so tomorrow or Wednesday is more likely.  That gives time to see if it holds support around $18.35 – $18.40.

• MSFT is on the top side of its trading channel for the past five months near its trend line of slightly lower highs
• MSFT is on the lower side of its trading channel for the past month and a half of higher lows
• MSFT has broken below its 10 day moving average for the past three days, but only closed below it yesterday and is trading above it today
• MSFT held support on its 20 day moving average yesterday
• The 14 day Williams %R indicator for MSFT broke below overbought yesterday losing momentum, but recovered today and the 28 day indicator c0ntinues to maintain momentum

Opinion – MSFT needs to get above its five month trend line, currently around 20 before I get bullish.  Support could come from its 10 day moving average now that it recovered, but that’s in jeopardy.  The next line of support is the 20 day moving average again.  The low from yesterday could be the new point to watch from the upwardly moving trend line of higher lows.  If MSFT gets back down to the $16.00 range it’ll be time to buy with little risk, until then I’m staying nimble on it.

• AMZN is at the top of its trading channel near its trend line of higher highs
• AMZN held support on on its 10 day moving average yesterday
• Based on premarket prices, AMZN  is heading towards its 20 day moving average
• Williams %R for the 14 day indicator broke from overbought yesterday

Opinion = AMZN is losing momentum and is due for a move closer to its trend line of higher lows if the 20 day moving average doesn’t hold.  Support could come from its 50 day moving average and/or from its two horizontal lines I drew that mark previous short term bottoms.  The lower of those two is about to connect and that’s where I think AMZN is heading, not too far below $67.00.  I’m waiting to buy in, but not so confident yet that I’m shorting AMZN at these prices.