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Rotation - After gyrationsINVESTMENT CONTEXT S&P 500 Energy Sector has registered 10-trading day decline dropping by 23.7% as fears of recession and lower demand pushed traders to liquidate longer-dated positions On June 23, all 33 of the U.S. biggest banks, some of which considered as systemically important, successfully passed the Fed's annual stress tests, confirming their ability to lend and maintain capital levels during severe economic breakdown During the summit in Brussel on June 23, Ukraine and Moldova formally received the symbolic status of "candidates" to join the European Union JPMorgan does not expect a recession to materialize over the next 12 month; according to the Bank, global growth will accelerate from 1.3% in the first half of 2022 to 3.1% in the second part of the year thanks to recovery of Chinese economy On a different note, Germany warned that Russia's move to curb natural gas deliveries to Europe could trigger an economic downfall similar to that caused by Lehman Brothers at the onset of the Great Financial Crisis Copper prices recorded 16-month low on June 23 because of growing worries about rising COVID-19 cases in China and stoking worries of a global economy recession PROFZERO'S TAKE As the world finally takes notice that there won't be a solution to the current industrial crisis unless a global strategy on energy emerges, ProfZero has witnessed the steep correction faced already by commodities just on fears of a recession. Brent crude has plunged to USD 110/boe after some bull analysts forecasted it could top its all time high at USD 147.50/boe (July 2008); iron and copper are down 30% and 17%, respectively, on a monthly basis, while also wheat prices retraced 25% from the all-time high touched on May 17. Albeit encouraging under an inflation perspective, these signs may be indicative of greater distress in commodities - hence more stringent need to quickly restructure global supply chains, particularly as soft commodities are exposed to extreme conditions (Italy drought) Growth stocks roared back on June 24, as traders unloaded Value and commodity-driven stocks repositioning in favor of the battered tech segments. ProfZero argues the move comes as investors reassess the likelihood of a recession, which would undoubtedly punish cyclical players, starting from big-ticket items (automotive, leisure operators) down to non-core consumer goods (non-food retail, handheld devices). As Growth trades still at record lows, it might be a good chance to start fishing for opportunities before the next cycle kicks-in - yet bearing in mind that within the next 2 weeks markets will still likely face volatility spikes due to June inflation reading in the U.S. (ProfZero does not expect a major slowdown yet from May's 8.6%) and Q2 earning season After Citi and Deutsche Bank located the probability of a recession in the U.S. at 50%, JP Morgan historical bull Marko Kolanovic reiterated his positive stance for a soft landing in the second half of the year, thanks to solid Chinese recovery and stabilizing geo-political conditions, including the conflict in Ukraine . As much as in May, ProfZero fails to share Mr. Kolanovic constructive tone. Although fully persuaded the war in Ukraine shall end, any tangible sign of relief for the world economy will take months to materialize. In China, President Xi has confirmed the country will achieve the 5.50% GDP growth target it set; yet, it remains to be seen then how the country will cope with its internal hurdles in real estate and rampant industrial overcapacity (steel)
by ProfZero
The oil goes overboard (2030-2040)Today's energy crisis is not a sign of strength of the oil companies, it is rather witness to the fact that the world economy has a very high productivity, still partly based on fossil fuels, but now moving towards properly renewable and alternative resources. I believe that the tops we will reach in the next few months will only accelerate the transformation into properly renewable energies. Oil demand will drop rapidly in the next decades, altough the demand will remain for some products (plastics, mechanics, etc.). This is not a trading recommendation, nor an advise to buy or sell anything.
TVC:UKOILShort
by Lobotto
It's the energy, babyINVESTMENT CONTEXT Inflation in the UK reached 9.1% in May, up a tad from 9.0% reading in April IEA warned the EU to brace for a potential full cut of energy supply from Russia, with outsized repercussions on the bloc's GDP Germany’s finance minister called the EU ban on sales of combustion engines cars by 2035 a “wrong decision” Goldman Sachs upped its latest forecast for probability of a recession over the next two years from 35% to 48%; ARK's CEO Cathie Wood identified in the Fed's excessively tightening monetary policy a cause that could plunge the economy into recession On June 21, ProShares launched its Short Bitcoin Strategy ETF (BITI), the first inverse exchange-traded fund linked to BTC, which allows investors to bet against the world's largest cryptocurrency by market cap Crypto exchange FTX extended a USD 250mln credit line to crypto lender BlockFi, shortly after bailing out crypto broker Voyager Digital with a USD 485mln loan PROFZERO'S TAKE All Profs timely highlighted the criticality of energy driving the next steps of the ECB monetary policy - other than hopefully accelerating replies from the industrial side, in an effort to ensure greater security and diversification of supply to the continent. Now those warnings are coming to the fore. The Central Bank of Spain estimates a full halt of energy supplies from Russia would plunge EU GDP by between 2.5% and 4.2%; Goldman Sachs locates the crunch at 2.2%, with sizable impacts in Germany (-3.4%) and Italy (-2.6%). Risk management predicates the "build back better" doctrine - when a major crisis strikes, opportunities arise for decision makers to rebuild infrastructures, making them more resilient. Profs really hope this time the EU won't turn a blind eye to the opportunity of pursuing for once a coordinated, integrated, energy strategy The escalating narrative between U.S. President Biden and the energy sector majors regarding lifting energy output is starting to look paradoxical to ProfZero. According to EIA, U.S. crude oil production was 17.44mboe/d in Q2 2020, at the trough of the pandemic (on April 20, 2020, WTI futures closed on negative territory at USD 37.65/boe below zero); it took 5 quarters for the industry to add 1.5mboe/d, setting production at 18.94mboe/d in Q3 2021, and yet 3 more quarters to add another 1mboe/d (output in Q2 2022 is estimated at 19.94mboe/d). U.S. production broke through 20mboe/d only once in history, on Q4 2019 - at the peak of the previous economic cycle. President Biden demand to hike internal output in a bout to put a lid on retail fuel prices looks therefore hazardous; it would heavily backtrack on the much-touted energy transition off from fossil fuels, while amassing capital investment in a sector that has been demonstrated to require entire quarters before its output may adjust. Even deeper into detail, U.S. refining capacity plummeted from all-time high in - guess when - Q2 2020 at 17.72mboe/d to 15.56mboe/d in Q1 2022, owing exactly to the energy transition kicking older plants off the industry, while leaving higher margins ("crack spreads") to those who stayed. As much as soft commodities, the move off from crude oil into natural gas has been taken for granted for too long. Policy makers were swift to point the finger to the bad guys; but too little was done to build the infrastructures of the energy of the future. A few more refinery runs won't make up for the problem PROFTHREE'S TAKE Out of the crude oil frying pan, into natural gas fire - mindful of coal burn. The Netherlands lifted limits on its three coal-fired power plants from 35% to full capacity until 2024; similar measures were undertaken by Austria, Germany and Italy as Russia goes all-out on natural gas curtailments. European Commission President Ursula von der Leyen urged Europe not to "backslide" its long-term commitment to cut fossil fuel usage, and to remain focused on "massive investments in renewables". ProfZero and ProfThree's eyebrows are as high as TTF gas prices - with but 4 months ahead of winter season, and the notorious impossibility for renewable energy to be stored, Profs are in fact fearing a much more worrisome backslide for the EU - one into full energy recession
CME:BTC1!
by ProfZero
Crude in retracementCrude oil prices are in clear retracement this week, in the midst of broad market down trending. Previous week's assessment was that Crude stalled, and the week passed saw Crude reach near target, almost 124, before stalling and retracing. For interest, white arrows show entry and exit points that were taken. Just days after closing the trade, Crude turned down for a retracement, and started with a weekly down candle that wiped out 5 weeks of gains. The daily chart shows that particularly after FOMC announcement of the 75 basis point increment, Crude took a definitive step back, and as the news sunk in, accentuated the slide downwards. Crude is in retracement mode, that appears to target 95 bounce support at the moment. The trajectory is broken, but the target for USD155-160 for 2022 is still in the making; IF Crude prices falls and maintains below 82, then it nullifies the USD155 projection. Weekly and Daily technical indicators are bearish for now. Look for 100 and 95 as supports over the next week.
NYMEX:CL1!
by Auguraltrader
ExxonMobil Shooting Star PatternThe weekly candles for the oil and gas company, ExxonMobil, look quite bearish. This could be the start of a major decline. There is a shooting star pattern forming on the weekly chart, while the oscillators are trending down and while the daily EMA exp ribbon and daily trend lines breaking down. Although anything can happen, it is looking like a major bearish reversal is occurring. It's sad that just last week all the "expert analysts" at CNBC were making strong bullish calls about energy stocks, citing "free cash flow" and numerous other reasons to buy them, all the while the charts are showing a topping pattern in energy and commodities. This is usually when tops form - when there is no bearish sentiment among anyone, and when strong hands are selling to weak hands. At least charts do not lie, and thanks to @TradingView anyone can access them alongside a plethora of crowd-sourced scripts and indicators.
NYSE:XOMShort
by SpyMasterTrades
Dead cat's bounceINVESTMENT CONTEXT Markets reacted positively to the Fed's 75bps rates hike on June 15. Traders in particular appreciated the positive tone on 75-50bps increase next month According to the latest Fed forecast, inflation is expected to top 4.3% by the end of 2022 and 2.7% in 2023; unemployment is said to reach 3.9% in 2023 and 4.1% in 2024 On June 16 the Bank of England raised interest rates by 25bps to 1.25% U.S. retail spending including food and fuel decreased by 0.3% in May, against analyst expectations of 0.2% growth Russia increased the initial cut of gas supply on Nord Stream pipeline to 60%; supplies to Italy were reported by energy giant ENI to be down 15% already as of June 15 The leaders of France, German and Italy arrived on June 16 in Ukraine to discuss the country's bid to join the EU Blockchain assets mildly joined the broader markets rally. BTC regained USD 22k and all Layer-1 altcoins jumped by 10% on average PROFZERO'S TAKE "Dead cat's bounce" is a rather grim traders' jargon for abrupt asset price spikes after a steep selloff. ProfZero is not buying the broader narrative of an equity comeback - even yesterday's rally, while remarkably setting Nasdaq once again above 11k threshold, looks set to be fizzling out already by today, as live future quotes point to a rather harsh opening, with the S&P 500 and Nasdaq falling 1.78% and 2.24% in pre-market - in fact, giving back all yesterday's gains. If we look carefully, the very same thing happened on April 29 this year - Fed Chair Jerome Powell announced a widely expected 50bps rate hike; markets rejoiced for literally one session, before engaging one of the most spectacular one-day sell-offs since the onset of the pandemic in Q2 2020. The difference between a good trade and a bad trade is not in its profitability. Trading is not a one-day endeavor. It is not a daytime job. As shared with ProfThree back in the day, trading is a vocation. And like all vocations, it requires but one thing: consistency. ProfZero consistently called for calm, and to set eyes on value. And as of now, value is simply nowhere to be found, as the joint forces of commodity record-high prices, energy transition, China's fading role as "world's engine of growth" and crawling uncertainty in fixed income markets are questioning the very industrial model our reality is built upon. "Who you gonna call?" More than Ghostbusters, ProfZero would love to see a political and industrial class of reliable, committed agents gauging head-on re-industrialization, de-materialization and new energy. Too much too ask on a post-rally hangover morning? ProfZero is still kind of wondering what ultimately triggered the Fed's 75bps rate hike, after that no later than in May it committed to a series of 50bps raises in its upcoming meetings this year. Was it the negative surprise on inflation (8.6% in May vs. 8.3% in April)? Or was it rather June 13 market meltdown? And strictly related - are we going to be "surprised" again, when June inflation readings will be circulated in a couple of weeks? According to EIA, global demand for crude oil in 2022 will sit just below 101mboe/d - substantially restoring pre-pandemic consumption. A slight 0.7mboe/d oversupply would then act as trigger for prices to cool down - even considering 1.3mboe/d missing barrels from Russia. The picture for natural gas however looks less bright. Russia's acceleration on volume curbs to Europe is set to exacerbate pressures on energy transition - yet undermining near-term supplies right amidst stock-up season. European leaders have turned to new partners in Algeria, Congo, Egypt and Israel amongst others, and loosened restrictions on coal to endure the next winter season; yet the plan to have 45% of the energy mix from renewables by 2030 hinges on immediate layout of plants across the continent. Perhaps ProfZero did miss some news out there? Blockchain assets only timidly participated June 15 rebound, as investors keep shunning the riskiest corners of the market
CME:BTC1!
by ProfZero
BCOUSDCount for Brent Crude oil (BCOUSD) starts from covid low at $17.52 in April 2020 Vessels of oil where turned back at sea during lockdown. Supply was enormous, drove crude oil prices to negative territories which made headlines- something beautiful to have witness. LOL Five wave up from April 2020 low to March 8 2022 high March 8 2022 high of $135.84 is holding up strong, so far am tracking 1-2 formation decline which seems to suggest a zig-zag correction 5-3-5 (too early to call) High prices in crude oil may/could/should have peaked. Consumers may be looking forward to some relieve in the near term as price seems to cool off. Zig-Zag correction means bears are coming in strong and if formation holds true it means the market likes whatever is been done to fix the high oil price at least in the near term. decline below Wave B at $100.35 confirms high at 127.02 is in place ideal entry would be price below $100.35 with stops slightly above 127.02 Disclaimer: We accepts no liability whatsoever for any loss or damage that may result, directly or indirectly, from any forecast or opinion, information or omission, whether negligent or otherwise, within this report
OANDA:BCOUSDShort
by Ola250
USOIL 14th JUNE 2022Before July, USOIL was seen moving in the consolidation channel area which tends to be bullish. in July, USOIL sentiment will tend to be bearish. The Organization of the Petroleum Exporting Countries (OPEC) member states announced plans to adjust oil production upward in July by 0.648 million barrels per day at the 29th OPEC and non-OPEC Ministerial Meeting on June 2, reports the organization’s press service. US President Joe Biden has repeatedly appealed to Saudi Arabia to increase its oil output without success. UK Prime Minister Boris Johnson also asked Saudi Arabia and the United Arab Emirates to boost production. He too was rebuffed.
TVC:USOIL
by DNP-FX
5
Surprise? What surprise?INVESTMENT CONTEXT S&P 500 and Nasdaq recorded their worst week since January, sliding 5.1% and 5.6%, respectively; Nasdaq compounded losses close just shy of 7% in 2 days (June 9-10) ECB plans to stop its bond-buying program to cool record-high inflation (8.1% reading in May). The gap between Italian and German 10-year bond yields hit 227bps, the highest since May 2020 At a security summit in Singapore, China’s defense minister Wei Fenghe accused the U.S. of interfering in Chinese internal affairs and confirmed that annexation of the “China’s Taiwan” is a historic mission Fuel prices in U.S. hit 40-years max and keep rising while shale production remains sluggish to heed calls to hike volumes Blockchain assets collapsed under U.S. inflation data and EU monetary policy. On June 13, BTC entered USD 25k area (18-month low), ETH plunged to 13-months low, and all Layer-1 altcoins lost about 20% value during the weekend in a sector-wide rout PROFZERO'S TAKE As anticipated on our June 8 Parlay, there are still significant pockets of volatility on the market to call the bottom. In particular, we reiterated that the uncertainty that then permeated the ECB monetary policy could disrupt the feeble sidelining trade engaged by equities in the previous weeks - and so it happened. ProfZero does not share the surprise of many operators - neither for U.S. inflation at 8.6%, nor for ECB potentially raising interest rates by 50bps in September. Instead, it may now be the time to appreciate greater clarity from the regulatory side; definitely not a Buy signal, but a better environment to express investment strategies Rout in blockchain assets called by ProfZero as early as May 11 - and potential for more falls. No time to play PROFONE'S TAKE On June 9, along with the 25bps interest rate hike scheduled for July, the ECB declared the end of bond-buying era ("whatever it takes", anyone?), thus intensifying the pressure on Southern European countries (Italy, Greece, Spain, Portugal) by sending their prospective borrowing costs higher. The gap between the Italian and German 10-year bond yields (considered as benchmark of eurozone market stress) reached 227bps, the highest level since May 2020, confirming the general market trend of investors avoiding risk assets in favor of safe havens. ProfOne argues Christine Lagarde's calls to avoid “fragmentation” in the continent's monetary policy is shaky, at best. For on one side it’s inherently contradictory to prevent non-homogeneity among the economies inside of EU, while on the other pursuing "selective quantitative tightening" would disparage the safety net around the continent's most virtuous economies. In yet another head-scratcher for traders, the debt crisis of November 2011-July 2012 looks set to resurface PROFTHREE'S TAKE Following ProfOne’s comments on the metals of the future, ProfThree has a lot to say on copper which is considered the key component on the road towards de-carbonisation. A recent 18% y-o-y plunge in copper exports from Chile (the world's largest producer) in May spooked traders given an already undersupplied market, judging by the critically low level of stocks at both LME and SHFE. In the fundamentals equation, ProfThree sees supply as fixed, since there is zero greenfield projects coming online for the foreseeable future, while those under discussion or development are mainly located in risky jurisdictions (Chile, Peru, Congo), putting even future supply under threat. At the same time, on the demand side there is ever growing demand from EV makers, as well as solar and wind mills producers. With that in mind, Profs are in full agreement about copper joining semiconductors and battery minerals (cobalt, nickel, lithium) in the list of the commodities of the future - each remarkable tainted by yet new supply-chain uncertainties
CME:BTC1!
by ProfZero