After today's actions we are covering all of our short positions and going long crude. Today crude tested support at $74 and ended solidly up. After a $10 downleg from it's recent highs oil could be poised to rebound and push towards $ 90 per barrel.
The outlook for crude oil is getting more bullish. Power problems in Venezuela will drive additional demand and E. Europe is experiencing extremely cold weather which will drive oil fired electric generation. More importantly, Goldman Sachs is spreading rumors that China may revalue the yuan by 5%. This is bullish for all commodities as a rising Yuan tends to support commodity prices by making imports cheaper for China. Finally and most importantly, we here at Black Gold think that President Obama will announce major new stimulus program's during this week's state fo the union speech. The loss of the MA senate seat has served to focus Democrats attention and as the #1 issue is jobs, we think they are finally going to move to address this issue.
The upcoming speech, revaluation rumors and our bet that inventory numbers will be bullish this week are what's behind the decision to both cover and go long. Otherwise, we would've just covered our short and waited for confirmed signs of a stronger market.
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