Chart Courtesy of StockCharts.com



Crude oil is still straddling the $75 price area, while USO is range bound between $35 and $41. Last nights API report was mixed with crude and heating oil stocks falling but gasoline stocks rising.

The market went nowhere overnight, which means that traders will be responding to the U.S. government EIA data which will be released this morning. Weather isn't as much of a factor now as spring is actually fairly close if Mr. Grounhog says something different.

What's just as important for oil prices at this point, though, is what the dollar does. A stronger dollar has been keeping oil prices at more modest levels. And if the overall trends in the markets continue, the odds favor a strengthening greenback.

And as with other important markets, USO is at its 200-day moving average, the line that defines bull and bear markets. A slip below this key line and a continuation of lower prices beyond that would be a signal that the markets are betting on lower prices ahead.

That opens up a whole new can of worms, as it could be signalling expectations of another down leg in the global economy.

How oil responds to the supply demand equation is important. But how it responds to whatever happens in the dollar is just as relevant for investors, and eventually for consumers.


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