OIL NEARING RESISTANCE?

THERE'S RESISTANCE NEAR $38... Over the past couple of weeks, we talked about gold being overbought (and due for a correction) and the CRB Index nearing chart resistance at six-year highs. The same is true for crude oil. Chart 1 shows nearby crude oil futures ending last week just shy of $37. That puts oil within a dollar of the peak hit during the summer of 2000 near $38. We're not sure what it's going to do there, but it's always a good idea to know where these potential resistance barriers are located. Given the recent downturn in gold, the bounce in the dollar, the pullback in bonds, and a stronger stock market -- we wouldn't be surprised to see oil prices start to pullback as well. This a logical spot for that to happen. Chart 2 shows even heavier resistance near $40.

Chart 1

MAJOR RESISTANCE AT $40... Chart 2 shows the 12-years since the last Persian Gulf war. At that time, crude oil prices spiked up the $40 -- before turning back down again. We don't expect an exact replay of that scenario (especially since commodity markets are now in a bull market). However, the $38-40 zone could represent a formidable barrier to rising crude oil prices.

Chart 2