Above is a multi-year chart of oil. Notice the following:
-- Although oil dropped in mid-2006, that had more to do with Goldman Sachs rebalancing it's energy index than a market fundamental. In other words, the sell-off in the second half of 2006 was a technical rather than fundamental event.
-- The market has been rallying for the better part of the last year.
-- The market has been consolidating for the last 4 months.
Above is a chart of the last 6 months. Notice the clear consolidation pattern that is going occurring. Also of interest is the fact that over the last 4 months talk a a recession has increased yet oil hasn't dropped below technical support in the upper 80's. That means that so far -- even with the possibility of a slowdown in growth -- the market still thinks oil is a pretty expensive commodity.
