Purely from a near-term technical perspective, today's geo-political "strength" in crude oil and its ETF the US Oil Trust (AMEX: USO) has the look of a minor recovery bounce rather than the start of a new upleg in the aftermath of the $6 and 5.5% decline since the July 2 high of 117.94 in the USO (to yesterday's reaction low at $111.63).

If the upmove does turn out to be "just a bounce," then we should expect the USO to head still lower into a full-fledged test of its 15-month support line, now at 108.80. The inability of oil prices to climb in reaction to big drawdown inventories this morning suggests strongly that prices are in the grasp of a significant downside correction that is not yet complete.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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