After sinking to new swing lows together, stocks and Crude Oil reversed higher off positive divergences.
Let’s pinpoint the price action and study the lesson from the dual divergences and reversal:
The unified chart above tracks the S&P 500 (NYSEARCA:SPY)(@ES Futures) with Crude Oil (@CL) on the 5-min intraday chart.
Price continued a sell-swing to new lows – 1,810 in the @ES and near $26.50 for Oil (NYSEARCA:USO) (yes that low) on positive momentum divergences (green arrow).
When price tests (touches) a higher timeframe support level on lower timeframe positive divergences, it often signals a likely reversal (short-term) is more likely than additional downside price action.
In this way we always monitor momentum (an indicator) with price, particularly at key higher timeframe levels.
A surprise news announcement – OPEC may actually cut production? (way overdue) – set the stage for the price reversal and rally we’re seeing currently.
Price broke through falling moving averages and prior swing highs to emerge into a new intraday uptrend.
The strength in price we’re seeing today builds off the foundation of yesterday’s positive divergence reversal.