This simple number,4, as in 4 million barrels a day... was enough to send oil prices TUMBLING almost 4% today in trading. You can read about it here.
Simply put, with OPEC able to pump out about 32 mmbbl/day of oil, and are saying they will freeze production there (rhetoric, they've had production there this whole time... the "freeze" is just words to make prices go up without them actually having to change anything at all--but that's another post), but Iran saying that they won't budge until 4 mmbbl/day.
Do the math, that's a potential 12.5% increase in the oil glut over the next year or two if demand doesn't pick up to burn through it. And even more so if the markets turn suddenly bearish over the next few years nuking demand even further. If you remember the mention of "ceiling target raise" of 1 mmbbl/day in December being enough to send WTI crude from the mid-30's all the way down to $26.20, just think what an actual production increase of 4x that could do to prices...as well as the rest of the market.
Have a look at the SPX and the battle for 2020. The ECB stimulus package last week supposedly introduces about $20bil into the global market place. Add that to a FOMC meeting announcement on 3/16 this week to a lot of "buy on the rumor" of the Fed introducing a similar "let's not have the market crash this time" stimulus. Personally... as someone who traded the 2008 and 2009 crash, let me tell you that $20bil is pittance on the overall market cap of the S&P 500. It is stupidly trading the market up when the bailout packages were more along the lines of $700bil. I can understand the latter being something to inflate banks--but $20bil? That's the market cap of a single company. Hardly worth a "bull rally" past $2100 on the SPX.
So if the news Wednesday doesn't come with a swift stimulus package, you can expect the traded in hopes of the market now could fly away as quick as they entered.
VIX shows no signs of a bear market yet, which just shows that nobody's taking the bear bet yet for the long haul, but that could come overnight. The ranges for both bear and bull cases are shown. And on the OVX it's the same story. The selloff in oil today did not have a reflecting move in the OVX which sort of struck me as odd... something worth noticing at least.
WTI Crude Oil is doing what the SPX did, which is break up briefly above the target resistance level, but now it's turned south and tomorrow will be more of an insight into this rally being squashed because of Iran, or this just being one really red day on the move up. My bet is that things go down if this SPX 2040 isn't achieved quickly between now and Wednesday.
And if you are a bull, here is your saving grace. HYG shows that there is still some upside to the corporate bond trade, and this coincides with a move to roughly 2060 in the SPX if that happens. This could trade up on the rumor of Fed stimulus or even funds rate reductions (reversing their last decision), but also turn nasty south if Yellen fails to deliver.
Either case, this is a flat, weird, choppy, no-man's-land trade that unless you are a glutton for punishment... why not just sit this one out until the market figures out what it wants to do. It will be easily known very soon. 2060+ it's a bull market with a likely 2160 test and if 2000 is lost it's 1800 and lower, possibly 1400 within 18 months.
Whatever you do, exercise caution in your trade. If you are in...don't flip flop here trying to chase the winner... he hasn't emerged yet. So pick your side, make your bet, set your stops, and be patient and wait out the up and down. Ride if right, reverse if wrong.
And as always, stay liquid my friends...
Submitted March 14, 2016 at 07:22PM by gabriel87120 http://ift.tt/1MjgqcA
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