NEW YORK (Real Money) -- The dollar has made commodities a more difficult read. The action in Europe has not only kept the euro and dollar bouncing around, but also played havoc with oil. When there is a lot of whipsaw action and doubt in oil, we often see it reflected in the Market Vectors Oil Services ETF (OIH).
After a very strong six-week period from mid-March through the end of April, OIH has hit the skids a bit. This year hasn't been horrible, with the OIH down just a couple of ticks, but down is down and that's where the path of least resistance still stands. Since the recent May top, price has steadily moved lower in a bearish channel. At first, it looked like nothing more than a bullish flag, but the length of the move lower now exceeds the previous move higher. That's no bullish flag folks. It's a bearish channel.
Support comes into play at the base of the channel with resistance at the top. Fairly simple; however, if OIH closes under the first level of support, I would look for it to head all the way to the $32 area. Nothing in the technicals, whether on this chart or other ones I use, shows any divergence or bullish hint of activity. The only good news might be the short-term correlation between West Texas Intermediate (WTI) crude and OIH is zero at the moment. The bad news is the OIH chart isn't bullish, so the lack of short-term correlation isn't really a plus. Additionally, the last six weeks have seen WTI hold steady while OIH has fallen. Still want the zero correlation?