Crude futures are heading south again following a bounce off our 2nd tier uptrend line earlier in the session. The weakness comes after disappointing manufacturing PMI data from the EU combined with a U. S. existing home sales number shy of analyst expectations. Both data points indicate contraction in the global economy, knocking a dent into the hope for an economic recovery.

A slowdown in EU manufacturing implies a decrease in demand for crude. Meanwhile, lagging existing home sales raises uncertainty regarding the state of America's economy. The disappointing economic numbers are providing the fuel bears need to place more downward pressure on the techincals of crude's uptrend.

Crude futures have already had an impressive run from yearly lows, and investors were looking for a reason to take profit and send the futures south. Additionally, our 2nd tier uptrend line has more historical strength than our first tier, meaning it wouldn't be surprising to see crude retest June lows. If this happens and June lows don't hold, then the pullback in crude could pick up speed in the near-term.

Crude's ability to hold its June lows will likely depend on the S&P future's ability to hold the lower end of their May trading range. Therefore, investors should keep a close eye on the performance of the S&P futures as well as that of gold.

Gold dropped through what we deem important near-term uptrend lines, and a retest of its psychological $900/oz level seems likely. The performance of the precious metal is important for crude futures since the two investment vehicles are positively correlated.

The ability for crude futures to hold onto their June lows may also depend on the outcome of weekly inventories. Inventories have been coming in shallow lately, and a rise in inventories would likely place more downward pressure on crude and raise near-term volatility.

Investors should keep an eye on performance of the Dollar, for an appreciating Dollar decreases export demand. Unfortunately for bulls, all of crude's correlations are indicating that there is further room to the downside. Hence, we maintain our negative near-term outlook on crude.

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