There’s a Sherlock Holmes story where Sherlock solves a case because a dog didn’t bark at night at a crime scene where there supposedly had been an intruder. The dog not barking (“the curious incident of the dog in the night-time”) when it should have done so was a major clue to Sherlock solving the case.
Sometimes markets give us the same kind of clue. When a market does the opposite of the expected reaction to a report or development, it can be a strong signal as to the market’s direction.
This brings me to crude oil. In yesterday morning’s (February 2) Swing Trader’s Insight watch list I wrote about looking for a bottom in crude oil; my comment was “maybe a successful test of the $30 area will lead to a turnaround”. Although it came a day later, today’s action was what I described yesterday.
“The dog didn’t bark” clue was in the weekly inventory reports. Last night’s API report showed a bigger than expected rise in crude oil inventories last week. This pushed crude lower late yesterday afternoon, with March crude ending the day at 29.71.
By this morning, however, crude had staged a recovery, trading slightly above $30 as I was writing this morning’s STI watch list. The EIA inventory report is given greater credence by the crude oil market so this morning’s report was another opportunity to gauge the market’s strength.
The EIA report amplified yesterday’s API numbers, showing an even bigger build in crude oil stocks last week. The market’s first reaction was bearish, with March crude making a morning low of 29.74.
It’s here where “the dog didn’t bark”. Rather than continue lower (the overnight low for CLH was 29.40), crude oil found a bottom and by about 9:40 it was back above the $30 level. This upside reversal led to the anticipated rally as short covering and bottom pickers started the rally and momentum buyers accelerated the move higher as it moved up in a positive feedback loop.
Where does crude oil go from here? I’m more of a shorter term trader; the longer the timeframe the more cautious I am with my analysis. For now I’d watch to see if March crude futures can clear resistance in the $32 area. Longer term we’ll see if it can continue to hold above $30; rallying above last week’s high of 34.82 could mean more upside to come.

Essential Guide for Futures Swing Trading
In this guide, experienced trader and broker Scott Hoffman explains the trading methods he uses to analyze and trade the futures markets and to publish his trade advisory, Swing Trader’s Insight.
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