Crude futures continued their consolidation yesterday on marginal volume.  However, yesterday’s volume was substantially higher than Monday’s meaning we could see large activity and volatility today.  The futures are attempting to position themselves for a rally as they realize April highs suddenly aren’t so far away.  If the ADP Non-Farm Employment Change and crude inventories each beat analyst expectations, crude futures could push nicely above May highs towards our 3rd tier uptrend line. 

Meanwhile, crude should exhibit a positive correlation with U.S. equities until stress test Thursday.  Regardless of near-term activity, crude has made statement after statement concerning a commitment to its uptrend.  The last tests seem to be our 3rd tier uptrend line and April highs.  If crude can climb above these two obstacles, its gains could really accelerate.  Meanwhile, a drop beneath our 3rd tier downtrend line could result in sharp near-term losses.  

Volatility should pick up with the U.S. releasing its ADP Non-Farm Employment Change data followed by weekly inventories.  Crude inventories continue to come in far above analyst expectations, but the rise in supply doesn’t seem to bother investors as they hone in on a global economic recovery. Appreciation of the Pound and Euro should help international crude demand for the dollar denominated commodity.  Additionally, improvements in production and consumption data points around the globe are very encouraging signs for crude’s uptrend.    

Fundamentally, we maintain our supports of $53.97/bbl, $53.63/bbl, $53.19/bbl, $52.80/bbl, and $52.29/bbl.  To the topside, we hold our resistances of $54.34/bbl, $54.77/bbl, $55.24/bbl, $55.58/bbl, and $55.94/bbl.  $50/bbl turns becomes a key psychological cushion again while $55/bbl serves as a psychological cushion.  Crude is presently trading at $54.02/bbl.

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