May crude futures looked to be on a relentless climb to $90. A few of the large trading houses were setting sites on $100 crude. It peaked, however, at $84 in May and has not seen the $80 handle at all in June or July. Technical traders enjoy these trading resistance levels as it makes it easy to place trading on auto-pilot, allowing computer programmed algorithms to dictate buy and sell decisions.
The same technically driven trading strategies were a big reason for yesterday's large sell off in US equities. The DOW industrial average could not penetrate 10,400 resistance, triggering automatic sell signals driving stocks down over 250 points.
Traders will continue repeating the same strategy of selling resistance levels and buying support until some major fundamental event creates incentive to push through monthly trading ranges.
A few of the fundamental events to keep and eye on that would have the power to drive crude back onto the $80 handle are: a major hurricane striking off shore Gulf oil rigs, much better than expected quarterly earnings from large US corporations with strong forward earning guidance, the euro climbing above major resistance at 1.32, or the Baltic Dry Index climbing above 3,300.
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