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Crude futures are hovering just beneath our 3rd tier downtrend line, potentially the last trend-oriented technical barrier separating the futures from new 2009 highs. Of course crude would need to deal with previous 2009 highs and its psychological $75/bbl level. However, we feel our 3rd tier downtrend line could serve as a foretelling indicator since it runs through June 11th and 30th highs. Crude launched above all of our previous trend lines yesterday after weekly crude inventories plunged and caught investors off-guard. However, we have a muted reaction to this number since we believe it's directly related to the ‘cash-for-clunkers' program, likely a temporary stimulus. Our belief is reinforced by much better than anticipated manufacturing data releases this week. The boost in manufacturing has been needed to meet the jump in demand for automobiles in reaction to the ‘cash-for-clunkers' program. The ramp up in production coupled with the cross-country transportation required for vehicle deliveries is likely the driving force behind the surprise inventory deficit, and should bleed over into the next few releases.
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