$USO

Watching $USO with interest today, closing strong at 118.87. We've had a solid run lately, but the question is sustainability. Looking at the charts, a retest of 120 seems highly probable within the next week, maybe even pushing to 122 by month-end. I'd put those odds at about 65%.

Why? Primarily the supply side concerns aren't going away, and we're seeing some general risk-on sentiment in broader markets that could spill over, evident in today's $SPCX move. The current price action suggests momentum is still there. However, the other 35% factors in the potential for a swift reversal if we get any significant hawkish surprises from upcoming Fed rhetoric or an unexpected build in inventory data next week. So, while I lean bullish short-term, I'm not blind to the headwinds. Definitely not a set-it-and-forget-it play.

The latest CPI numbers, even if slightly softer than expected, coupled with the dollar seeing a bit of a rebound, has me re-evaluating some of the longer commodity plays. Specifically, crude oil's recent strength looks less assured in this environment. While geopolitical premiums are still a factor, the demand side could start to face some headwinds if a stronger dollar persists and rate cut expectations get pushed out further. I'm keeping an eye on the $USO chart for any sustained break below the current range.

It's not a call for a full reversal, but more a recognition that the tailwinds for commodities in general, and energy in particular, might be softening. The narrative was very much on the reflation trade, but if we're seeing persistent inflation but also a hawkish Fed, that's a trickier spot for growth-sensitive assets. I'm not making any drastic moves, but the watchlist is definitely skewed towards more defensive plays now, or at least highly selective commodity names that aren't solely reliant on broad economic expansion.