FED-UP   
                                    
Despite the dollar's relative strength yesterday, oil prices managed to remain firm. Actually, energy prices are leaking a bit in overnight markets even though the dollar continues to sink.

A coordinated effort by central banks to provide more liquidity to credit markets seems to have at least temporarily calmed fears in the financial sector and implies that joining the Fed in cutting interest rates may be in the cards.

The consequent effect of that may be the beginning of a rotation out of commodities and back into credit and equity markets as confidence in those sectors returns.

There also seems to be enough economic reasons to weigh on crude oil prices, given that both the EIA and IEA revised down oil demand growth for this year due to a weak US economy, while the IEA also expected oil supplies to exceed demand in Q2 by nearly 1MM bpd.

The market could come under a bit of pressure this session, if today's inventory report shows the expected rise in crude stocks. The market is sufficiently overbought to warrant a price correction soon, still participants must expect the market's ability to shake off bearish news.

Actually, a school of thought is coalescing around the idea that the Fed's efforts yesterday to provide more liquidity to the financial system, as another inflationary move that will ultimately boost demand for commodities.

With more and more money managers planning to commit some of their portfolio to commodities, a buy the dips mentality seems to be firmly in place.

Given what appears to be the market's entrenched uptrend and the residual weakness in the dollar it may take a structural shift in monetary policy to spark a change in rationale. Perhaps It may be time to actually raise interest rates to protect the dollar.   
                                       
M. Fitzpatrick