While commodities such as gold and copper have crashed, oil continues to rally.  As chart below shows, the exchanged traded fund for copper (NYSE: JJC) has fallen as the exchange traded fund for oil (NYSE: USO) has surged.

That should not be happening as both oil and copper have followed the same trajectories.  Both are commodities heavily utilized for industrial purposes.  By contrast, gold and silver have much higher investment end uses.

But the heavy liquidity influx from quantitative easing measures by central bankers around the world has overwhelmed the traditional trading paradigms.  After Quantitative Easing II, gold and copper surged.  But after Quantitative Easing III, gold and copper have crashed.

Oil, however, has continued to rise, as shown by the chart below.  This has happened despite low demand and high inventory.

Investment capital now is seeking depth.  That is why the USO and US Dollar (NYSE: UUP) are both rising.  Generally, oil increases as the US Dollar falls in value.  That results from investors fleeing paper assets for hard commodities.  But has money is now seeking depth in markets, the USO and the UUP are rising as revealed by the chart below.

Until now, oil has managed too rise despite basic economic fundamentals.  Eventually supply and demand will make its weight felt in the price of oil.  For those long on the USO and other oil assets, it could be a hard fall…as it was for those long on gold and copper.  At present, the short position on the USO is 60.96%.

A short float of 5% is considered to be troubling for an asset.