Let’s continue with crude oil: short CL near $99, with an initial target of $95
Yesterday, I said that crude oil’s week-long rally was driven only by a sentiment premium over the Strait of Hormuz—not by a real supply-demand shortfall.
Today, the market has already responded: CL fell straight through $99 in overnight trading, reaching $98.68. Buyers near the highs are starting to lose confidence, which may signal that the sentiment premium is gradually fading.
Don’t fixate on news about conflict in the strait—you can’t distinguish between friction and a blockade that way.
Although there have been incidents involving tankers, the shipping lane hasn’t been completely closed, and crude supplies haven’t been cut off.
As long as shipping through the strait isn’t disrupted, this rally fueled by fear is bound to reverse.
The short-term long positions built up during last week’s 10% surge are sitting on substantial unrealized gains over the weekend.
Now that the market has turned, profit-taking will start to emerge. A concentrated exit by buyers could accelerate the decline.
The logic of high oil prices curbing themselves still holds.
As long as oil prices remain above $100, energy inflation will rise.
With expectations for Fed rate cuts pushed back, Treasury yields are climbing, while the Nasdaq and semiconductor stocks are falling.
Oil’s pullback is now easing this inflationary pressure.
If oil prices continue to fall, inflationary pressure on CPI and PPI will ease.
That would lift the biggest weight on tech stocks.
Next week, we’ll be watching two key levels:
First, $95 is our initial target for shorting CL. Once it gets there, we’ll also assess how firmly it holds above the lows.
Second, we’ll watch for a pullback in Treasury yields and the dollar, and see whether semiconductors and the Nasdaq rebound.
In this market cycle, crude oil is the master switch for market volatility.
If oil prices fall and inflation eases, U.S. stocks can rebound.
Yesterday, I said that crude oil’s week-long rally was driven only by a sentiment premium over the Strait of Hormuz—not by a real supply-demand shortfall.
Today, the market has already responded: CL fell straight through $99 in overnight trading, reaching $98.68. Buyers near the highs are starting to lose confidence, which may signal that the sentiment premium is gradually fading.
Don’t fixate on news about conflict in the strait—you can’t distinguish between friction and a blockade that way.
Although there have been incidents involving tankers, the shipping lane hasn’t been completely closed, and crude supplies haven’t been cut off.
As long as shipping through the strait isn’t disrupted, this rally fueled by fear is bound to reverse.
The short-term long positions built up during last week’s 10% surge are sitting on substantial unrealized gains over the weekend.
Now that the market has turned, profit-taking will start to emerge. A concentrated exit by buyers could accelerate the decline.
The logic of high oil prices curbing themselves still holds.
As long as oil prices remain above $100, energy inflation will rise.
With expectations for Fed rate cuts pushed back, Treasury yields are climbing, while the Nasdaq and semiconductor stocks are falling.
Oil’s pullback is now easing this inflationary pressure.
If oil prices continue to fall, inflationary pressure on CPI and PPI will ease.
That would lift the biggest weight on tech stocks.
Next week, we’ll be watching two key levels:
First, $95 is our initial target for shorting CL. Once it gets there, we’ll also assess how firmly it holds above the lows.
Second, we’ll watch for a pullback in Treasury yields and the dollar, and see whether semiconductors and the Nasdaq rebound.
In this market cycle, crude oil is the master switch for market volatility.
If oil prices fall and inflation eases, U.S. stocks can rebound.