Funny how it took a surge in oil prices to give the world hope, touching off a steep rally in U.S. stocks that is fast approaching the giddy stage. But hope of what? Why, of avoiding getting sucked into a catastrophic black hole of deflation, is what! The effort is doomed, I’m afraid — deflation has already reached critical mass outside of the U.S. — but in the meantime we are obliged to treat crude oil’s steep climb with deference, trading it from the long side rather than salivating over the prospect of shorting the peak of the next swoon. Meanwhile, and most immediately, the rally in the March contract would look even more impressive if it surpasses the external peak at 55.51 that I’ve labeled in the chart.
