Just as we are beginning to see glimmers of hope that our economy may finally be healing itself, I can't help noticing the concurrent indicators that suggest how screwed-up things have gotten over the past few years. Specifically, that we have become so leveraged to this whole Bernankafied low interest rate, artificial stimulus machine, that the only way forward from here is to ensure that the dollar stays weak and Treasury yields remain in the toilet.
The past month has been a perfect example. The dollar mounted a strong comeback versus the Yen, Euro and collectively as the Dollar index at a time when commodity prices were constrained and Treasury yields jumped back to their yearly highs.
In the case of oil, a 5%, 1-month decline in crude has brought value back to this market in the eyes of some investors.
"At this level, this is a trade," says Bill Baruch, market strategist at iiTrader in the attached video. As he sees it, crude is at the low end of its range, having touched $100 and slipped to the mid-$80s. "This is when you want to step in and buy," he says, noting "the limited downside " and bottom part of the range.
On a macro economic level, Baruch says there has been no shortage of domestic data to encourage investors to buy, and even more so on a global level, which he characterizes this way.
"There are three reasons why oil prices are a great buy down here. China, China and China," he says. "The global economy is demanding this."
Statistics bore out his Chinese demand thesis with that country now the world's number one oil importer, but I would also argue that a rising dollar (or more specifically a falling Yen and Euro) are playing an equally large role in oil's directional trend. While Baruch concedes that "the dollar is a huge part," he feels that it is "starting to get a little tired at this level" as it approaches its own 52-week high.
In the near term, Baruch is looking for crude to bounce off its 100 and 200-day moving averages of about $90, and make an initial run at $95. If that succeeds, he says "we'll start to boogie pretty good" and could trade back to the high end of the $80-$100 range, albeit still well below the 52-week high of $108 hit in late March one year ago.