Crude: there is major resistance at $42. My feeling is that the resistance will break pretty fast. The $38 range looks good. I'd look for a major congressional investigation into the crude futures speculation that forced this market up. The NYMEX is not an honest exchange, they don't enforce their margin requirements equally, and position limits seem to mean nothing to them. Specs pushed oil to $55. The CFTC sat on its ass. Again.

To explain this more clearly for those of you unfamiliar with futures markets. They are supposed to operate for "hedgers" which are the companies who actually own the crude oil. The speculators add liquidity to the market. Each futures contract is for 1,000 barrels, a tiny amount of oil when you consider what is produced. There are supposed to be strict "position limits" for specs so the market can't be cornered. Hedgers can only hedge what they actually own. The talk for the past three months was that position limits were being ignored, sham buyers were created, and margin---the amoount of money that has to be put up for each contract---had been reduced for certain large specs. But it is in "side markets" or off exchange trading where a ton of the speculation was done. It's obvious that several million barrels per day cannot be hedged in the futures markets so "hedging" was done in private.

A hedge, is simply a risk reduction strategy whereby you buy a futures contract at $40 and sell later for $50 when you take delivery of the crude that is selling for $50, thus the $50 price is absorbed at $40---for a while. Congress must look into this because the talk has been around for months and I believe it was reported in Barron's. Rarely is there talk like this when nothing is happening. The NYMEX is notorious among traders and many won't trade there at all.

The CFTC is a part of the problem, much as the sonambulent SEC was a part of Enron etc. for their refusal to supervise.