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Over the last three weeks (more or less), every point lower in the stock market is attributed to risk in the Middle East. Every downside move in commodities is attributed to risk in the Middle East. And every penny that crude oil moves in either direction is a direct correlation to the number of new pieces of news less than or greater than 100 per hour mentioning risk in the Middle East.

Ok, I am getting carried away.

But seriously, there is plenty of risk flowing from the Middle East. But that is like saying there are bubbles in my beer. There are always bubbles in my beer. There just happen to be more bubbles when it gets all shook up.

And there it is – the Middle East has been shook up.

Libya is still shaking as contingents of anti-Gaddafi-ites move to overtake the Ras Lanuf refinery and port. But with this exception, Libyan unrest (and that of its antecedents) has yet to pose any substantial threat to global oil supplies. The potential for contagion in more meaningful Middle Eastern countries is the real risk.

But even there, leaders in those countries (Saudi Arabia, for instance) are doing things to preempt the type of riots and unrest that are shaking up the neighbors. Things are fizzing something fierce … but the odds that everything bubbles over are still somewhat contained.

So what does that mean, you ask?

It means, despite the Gaddafi mess, crude oil could start to lose support unless Saudi Arabia missteps … or Iran goes on the offensive, looking to capitalize off the tribulations of its oil-rich neighbors. Crude oil (WTI and Brent) spiked higher last Thursday. And despite the jump on Wednesday, crude has not been able to regain those highs; WTI is taking a shot at its high this morning, but that may be due to this week’s draw seen in officially reported crude stocks as a result of fewer imports from North Africa and the Middle East … even though there is plenty of oil in the central US.

Bottom line: it seems very likely that a fresh and significant event might be required for crude to overtake last week’s high mark.

Looking at technicals for a moment, the chart below of Brent crude oil prices also shows Chaiken Money Flow (blue) and Chaiken Oscillator (orange). These indicators are typically used to capture the trends in positioning, i.e. money flowing in or out … momentum of long/short accumulation. It is said the best use of these two Chaiken indicators is to help determine trend changes; these trend changes typically occur when price and money flow or accumulation diverge. See the divergence in Brent crude below:

Money flow has been particularly divergent this week (circled) and the week prior. Does this all mean that traders are running from crude and a price reversal is highly probable? No. But it should at least send up some warning flags. Something to keep in mind, this particular price move in oil is different than your usual run-of-the-mill price action in that it is sparked by geopolitical fears and thus might impact traders’ mentality differently than simple supply/demand developments or economic data would. Still, money flow is always key.

The February US Nonfarm payrolls report was just released this morning at +192,000, slightly better than expected. The US dollar has not been much of a recipient of safe-haven flows lately, so this better-than-expected number may help knock back the sour growth/lagging yields dynamic that’s dominated the dollar’s decline.

And should crude oil fail to sustain triple digits, then maybe the prognosticators pointing to a oil shock on the economy will fall flat on their faces. If they do, then it removes some of the noise that is holding back the US growth story … that is keeping the Fed’s foot on the throat of interest rates … that is dragging the dollar ever lower.

There are important targets at 76 and 75.50 support on the US dollar index versus Oil (Inverted) Daily:

But this weekly line chart (below) of the US dollar index weekly looks ominous as it threatens to make a new weekly closing low. Is the writing on the wall? And does it say anything about 75.00? Can the US economy come to the dollar’s rescue? Or will crude oil wipe away those hopes?

We’d like to think crude won’t be as big an obstacle many think it will. And we’d love to see US economic growth hit a positive streak. It’s make-or-break time …

Today’s payrolls are still being digested … it seems they were just strong enough to keep the pessimists away, but not strong enough to bring in the optimists just yet.