Crude oil actually looks quite constructive lately if you look at the longer term chart. I hate to even mention the word deflation or inflation at this point, but looking at the chart of crude oil does not seem to indicate deflation anymore.
The chart shows the collapse from the 145 to low 30’s price range and then the massive recovery rally. I think the key point to make about the chart now is this long sideways consolidation since late 2009. The crude oil price has not really retraced that much of the mega rally from the low 30’s. So similar to my comments about the small 38% retracement in the broad market indicating internal strength, I think the same applies to crude oil now as well.
The longer crude oil oscillates between 70 and 80 range without breaking either side, the more bullish the eventual breakout will be. I suspect the breakout will be to the upside with a rough target of 110 to 120.
Crude Oil did have a fake breakout above the 80 level similar to the way the stock market had a false breakout above during March and April 2010 time frame. Those false breakouts tend to blow out the shorts and then trap new longs further building sideways cause and steam for the eventual move higher.
Clearly the big money is to be made when markets are trending. In 2009 that was between 40 to 70… and the next big trending move will be likely from 80 to 110. The hard part is getting a clear green light that the breakout is real.