Yesterday, 06.04.08, I stated that the downside objective that I specified on 05.21.08 was being tested. Intraday the July contract hit 12182 with an overnight low of 12160. Those tests were the first shots across the bow for the crude oil shorts. Today’s midday rebound back above the key (psychological as well as chart wise) 125 level was the direct hit below the water line. By the day session close the Jul contract ran back up to 12800 before settling up nearly 550 pts.
So the 05.21.08 high call before a specified pullback and 06.04.08 low call before the expected mid-to-upper 120s retest complete the “two-fer”. Barring some extreme event (e.g., Gulf hurricane, geopolitical event, etc), watch for crude to range out in the near term between 115-120 and 135-140. A close above 134 or below 122, basis the July contract will negate this outlook. Note that the Aug contract which traders begin rolling into next week, trades at roughly a 40-50 pts premium to July.
