Crude Futures Float above $70/bbl as Trends Collide
Crude futures are bouncing between our 1st tier uptrend and 3rd tier downtrend lines as our 3rd tier downtrend line reaches an inflection point with our 2nd tier uptrend line. While crude futures are encouraged by better than expected U. S. employment data, the futures are being held down by a rapidly appreciating Dollar. An appreciating Dollar makes Dollar-based commodities such as crude more expensive to export, decreasing potential demand and placing a downward pressure on price. However, an ease in U. S. unemployment is very positive for future domestic consumption of crude.
Therefore, crude futures are tempted to participate in today’s breakout in the S&P. Crude futures are being squeezed between our trend lines, indicating something’s gotta’ give. Meanwhile, the futures are building a solid platform above $70/bbl as they consolidate. The question becomes whether crude decides to side with equities or the Dollar. If the Dollar really is developing a positive correlation with equities this could turn into a more important topic. Therefore, investors should monitor the correlative behavior between the Cable, EUR/USD, and USD/JPY with the S&P futures.
Technically speaking, the main obstacles to the upside are our 3rd tier downtrend line and 2009 highs. If the S&P futures can separate themselves from 1000 while economic data continues to outperform, this may provide enough fuel for crude to tackle these barriers. As for the downside, crude futures have our 1st tier uptrend line, August lows, and the psychological $70/bbl to fall back on. We maintain our positive outlook on crude due to the encouraging developments in U. S. economic data coupled with the strong performance of U. S. equities.
Price: $71.71/bbl
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