Sweet Crude

As the price of crude started cooling off from its post-Katrina high of $70, many people predicted crude to sink below $50. Indeed crude briefly fell below $60, but as we predicted at the end of last year, crude has climbed back above $70. Subsequently, the $70 level has become a very strong support for crude. While other assets, including precious metals, went under steep correction, crude remained resilient, consolidating within a tight range between $69 and $75. This week, as the Fed storm cleared away, crude is back to challenging $75. Until the next August FOMC meeting, at least, we expect crude to break out of its current range (maybe even beginning next week) and find a new high. We expect the ever-present global political fear and high summer demands to support crude's strength in the coming months. Clearly, the long-term trend in crude is still very much intact, bouncing off the 200-day MA.