Everyone talks about higher CPI when crude is up, but ignores it when prices drop. Right now, lower crude oil is actually helping to soften inflation and weaken the dollar. Keep an eye on the neckline around $70—but it might not be easy to break. Why? Because from an Elliott wave perspective, we see crude trapped in a bearish triangle; that’s an A-B-C-D-E pattern, and if you will look closely, we are still missing wave E. So there is a chance that neckline will actually hold for now, and ideally cause some short-term recovery before prices drop and finally attack $60 which I think it’s very probable scenario for this year.

Bearish continuation on crude oil means that inflation can also soften, but usually this comes in with a delay. But it’s also important to note that lower energy, brings down yields as investors would then think that FED is closer to rate cuts, and as a result dollar drops.

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Grega