2x As Slippery On The Upside In Crude Oil w/ UCO

My focus this week is on the front month crude contract /QM_Z and the 2x beta etf UCO. On some days the service companies could outperform front month crude, but i think the big guys are loading up for a December spike in oil futures based upon USD$ seasonalities. And that is where the action will be. The measured move out of that ascending triangle is roughly 16.68+/-. So a move to 91.68 is definitely under way now from the break out at 75. $100 is attainable, but I think the easy money will be made by buying now any serious correction down from 79 (a throwback testing the 75 break out) in front month crude. Stops at 72.50 can be placed under buys at 75 on the retest of the break out. A break below 70 would cancel my bullish view of a sharp increase coming.

For the hyperactive trader SCO can be day traded against an accumulation strategy in UCO. Longs in SCO can be deployed on down days in crude, but should exercise a "close at end of day" mantra. This should be most effective in balancing out the beta shock incurred when playing this type of accumulation strategy on a juiced up derivative etf that re balances daily. Unless of course I'm wrong about the whole trade! If so you better be able to flip flop over to SCO fast.

The front month crude break out will be uncorrelated from the broader market, and actually should cause a 5-15% correction in the equity indexes. Because generally when oil begins to become more than 4% of GDP it causes a strain on business activities. This will cause analysts to adjust earnings models again with a downward bias on the most input cost sensitive firms.

Also, I think crude may get a run at much higher levels from here based upon several other reasons. As in Saudi bail outs via the American gas pumps. And it also serves as a job creation engine as "Drill, Drill, Drill" becomes a louder chant in the Halls of Congress. In order to keep the national debt buoyed up by "friends in the Middle East" they'll drag their heels on CFTC regulations. Doing so will allow for another speculative push in oil, so that the Saudis may capture higher prices in order to give them their bail out. Also, Texas regions hit with unemployment due to uncertainty in oil prices (less drilling activity) could see speculative drills put back to work as crude moves higher. BHI has already seen the rig count stabilize and begin to expand ever so gradually again. YoY eps comparisons should begin to see double and perhaps even triple digit percentage gains going forward; as earnings begin to re accelerate against crash level comparisons. All of this will be made possible by a steadily increasing oil price.

And what about those alternative energy jobs? Believe it or not higher oil is needed now more than ever in order to push capital back into those industries too. If you want green jobs they have to be economically viable. Oh, and don't forget about Iran. Sprinkle in some saber rattling from them and add it to the above outlook, and voila`! You get a push into much higher levels. It has begun. The Speculators are on the loose again!

**UCO trading notes:
Holding 13.89 or the 38.2% retracement line is important, but could see a dip below as I expect crude oil to revisit it's 75$ break out level once more. That could make UCO dip to as low as 11.91 - 12 area if that were the case.

On the weekly chart UCO is moving out of a descending channel, and this data also translates into a bull flag on the monthly chart. All signs seem to be pointing higher in this name. A move to 10 would cancel out the bullish bias.