Oil SQUEEEEEEEEEEEEEEEZE!

FUNDAMENTAL ANALYSIS
Crude oil reached for the sky today as it made yet another historial high of above $120! Last year, when the white house economic committee panicked over possible $150 per barrel oil, analysts were skeptical. Right now, I hate to say this, $150 does look like a possible and realistic scenario. The surge in oil price squeezed all the optimism from the stock market today, taking the Dow mercilessly down over 200 points by the end of the day even though Q2 productivity turns up better than expected, which is a sign of a recovering economy. In fact, sadly again, there doesn't look like there is any reasons, fundamental nor technical, for oil prices to come down at all. Oil fundamentals does support higher oil prices with reducing supply and growing demand and oil technicals show a strong bull trend riding atop a strong rising trend line with no signs of weakness nor signs of being overbought! Oil has never been this high and demand for oil has never been this high either. This means that nobody knows what to expect as economists and quants rush to update their economic models in order to generate a reasonable prediction of the future.

TECHNICAL ANALYSIS
Does this spell the start of a huge correction in stocks? I don't think so. I've already predicted that the Dow needs to drop to as low as 12750 in order to get off its overbought condition before it tries to break the 13000 resistance zone significantly, remember? In fact, the Dow staged a decline of over 200 points last month on 11 April before it mustered enough strength to break the 12750 resistance level significantly. This time round is no exception. So, this decline doesn't come as a surprise at all. I will be watching how well the 12750 support level hold up over the next couple of days very closely. To keep the game play unchanged, the Dow needs to stage a come back within 3 days, otherwise, a reassessment of the market behavior needs to be conducted. Let's see how it plays out.