Crude futures have eclipsed the psychological $70/bbl after British and U. S. manufacturing data points came in above analyst expectations. Investors are also digesting positive manufacturing and export data surfacing from China. The positive manufacturing data is tagging onto the success of last week’s better than expected GDP data along with an overwhelming response to the U. S. government’s ‘cash for clunkers’ auto purchase program. Meanwhile, the encouraging improvements in today’s manufacturing PMI data points are improving the outlook for demand of crude. Crude futures have received heavy buy-side volume over the past few sessions, confirming the significance of crude’s movement.

Another engine driving crude futures higher is the large depreciation of the Dollar against both the Pound and the Euro. The EUR/USD and GBP/USD have set new 2009 highs today, making large bullish moves of their own. The weakness of the Dollar makes Dollar-denominated commodities such as crude cheaper to import, thereby increasing demand. However, crude futures are approaching their 2009 highs along with our new 3rd tier downtrend line, meaning the futures have a few near-term barriers ahead of them to overcome. We notice similar obstacles in gold to the upside as the precious metal faces our 3rd tier downtrend line and June highs. Additionally, the S&P futures are trading right at their highly psychological 1000 level. As a result, crude futures may top out today and head for a little near-term consolidation.

While the S&P’s correlations are supporting a breakout in U. S. equities, we expect 1000 to provide near-term resistance due to its psychological significance. Even if the S&P should break through 1000 in the immediate-term, we’d expect a retracement and consolidation. As a result, immediate-term gains in crude may be limited. On the other hand, we have a ton of economic data left on this week’s calendar. If economic data outperforms globally and the ECB/BOE meetings provide favorable monetary policy decisions, S&P 1000 may be eclipsed sooner rather than later.

Altogether, the markets are making aggressive moves to the upside, favoring the concept of a global economic recovery. As a result, crude’s uptrend is all but confirmed. It will be interesting to see how crude inventories fare this week after last week’s surprising overflow. If crude inventories come in shallow and indicate last week’s rise was a fluke, crude futures could experience another push to the upside. However, we have a lot of data between now and then, so we will have to see how the futures react to tomorrow’s housing and pricing data points.

Present Price: $71.54/bbl

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