The selloff in crude has really gained traction, dropping below our previous 1st tier uptrend line and the highly psychological $50/bbl level. Crude futures failed to close above our 1st tier downtrend line on the 4-hour yesterday.

Crude is stepping in line with U. S. equities as economist heavy weights publicly question the validity of the near-term uptrend in U. S. equities. We haven't seen any concrete economic fundamentals to justify the present pullback due to the lack of data releases.

However, the earnings season kicks off with Alcoa after the bell and investors will begin to get the picture of how corporate heavy-weights fared last quarter. As for crude, corporate earnings signify present and expected production and consequential consumption of energy-based commodities.

Therefore, we expect the tight positive correlation between crude and the S&P futures to continue for the time being. The U. S. will release weekly crude inventories tomorrow and the number and disappointed expectations for four straight weeks. Rising inventories are placing more downward pressure on the price of crude.

However, if U. S. equities and crude happen to swing back into their debilitating economic crisis downtrend, we wouldn't be surprised to see OPEC enter with new supply cuts.

As for today, it will be interesting to see if crude can fight back to $50/bbl as investors try to hold the psychological threshold. Regardless, the support has been broken, creating a challenging path to the upside for crude.

We created a new 1st tier uptrend line which represents our point of no return as far as the uptrend is concerned. Therefore, we will keep a close eye on this trend line to see if it holds.

Fundamentally, we find resistances of $49.93/bbl, $50.42/bbl, $50.76/bbl, $51.28/bbl, and $53.30/bbl. To the downside, we see supports of $49.47/bbl, $48.98/bbl, $48.52/bbl, $48.12/bbl, and $47.12/bbl. Crude futures are presently trading at $49.51/bbl.

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