Crude Oil is a Fair Weather Friend it Seems

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5yr Crude vs USD - Apr 16, 2012

The USD began forming an uptrending channel in the summer of 2011.  Currently, it is still in play and until it breaks down, will assume it is going to stay that way.  Something that has caught my attention, however, is the sharp similarities between 2009 and today.  The USD looks toppy in this respect, but it's hard to say what will happen.  If it breaks down, could it help fuel a "rip your face off" summer rally as one of our resident pros suggests?  The USD is reaching a point of breakout from its contracting pattern that should set the stage for a few markets going forward.  Looks like a decision will be made in the next month or two.

In comparison to crude, oil has mostly attributed its gains to dollar devaluation periods  (highlighted blue) with little to no effect on our precious black gold during dollar appreciation periods (except the 07-09 bear market, but those were different market conditions than we have now).  In fact, both are in uptrends at the moment with higher highs and higher lows. 

These observations would suggest that if the USD breaks up, shorting crude will probably not be the ideal play.  If the USD breaks down, however, oil should be a good-looking long (at least until it crushes profit margins and households anyways).  We'll have to see at that time whether gold joins the appreciation party as well.

On a side note, $GASO (unleaded gasoline) is nearly at its highs again and seems to be uninterested in selling at the moment.  In any case, something to watch.  Well, I hope you all get as much out of this fresh look at these charts as I did.  Cheers.