Trading Desk Notes - November 24thSubmitted by Polar Futures Group on November 23rd, 2018
WTI crude oil tumbled to it’s lowest price in over a year...closing lower for 7 consecutive weeks. On October 3rd WTI hit a 4 year high ~$77 as the market feared a supply shortage especially given the American sanctions on Iran. This week WTI traded below $51...a 33% tumble from the October highs as the market feared a supply glut as OPEC (especially Saudi Arabia,) Russia and the USA produced record amounts of crude and the market feared a slowing global economy would reduce demand for crude oil. Speculators continue to liquidate long crude positions (voluntarily and otherwise) adding to downside pressure. New York wholesale gasoline prices have also fallen for 7 consecutive weeks...down ~35% from their October highs.
New York Natural Gas price soared higher the last 3 weeks ( as much as 40%) as the market feared a supply shortage ahead of the North American winter heating season (the past 10 days have been unusually cold creating a record draw down of Nat Gas supplies.) Frantic short covering by speculators also helped Nat Gas spike higher.
Stock markets around the world remain under pressure with the major American Indices, which have been the “Last Man Standing” as stock indices in the Rest Of The World tumbled the past several months, are now also negative YTD with the steepest declines the past 2 months coming from the (previously high flying) tech sector. Apple, which is the largest weight in the S&P 500 and the Nasdaq, has fallen ~26% from its Oct 3 All Time Highs...losing ~US$280 Billion in market cap.
Intermarket relationships: The major American stock indices, crude oil, gasoline and corporate bonds have all fallen sharply since the beginning of October while Gold, US Treasury bonds and the US Dollar have rallied during the same time period...a classic “risk off” profile.
My short term trading this week: At the end of last week I was long a small position of OTM S+P calls, thinking that the stock market was oversold and might bounce. (The DJIA closed Friday ~600 points above Thursday’s lows.) Weekend reports of Pence and Xi exchanging barbs at the APEC meeting had me thinking the market was going to take a hit...but prices opened only a little lower on Sunday afternoon and I took that as a positive sign...a market that won’t fall on bad news might rally. The market actually traded above Friday’s close during the Sunday overnight session but opened weak Monday morning and I hit the sell button...which was a good thing because the market fell like a stone for the next 2 days. (The DJIA dropped ~900 points from Friday’s close to Tuesday’s low.) Given that this was Thanksgiving week I didn’t trade very much. Going into the weekend, and using some cautious option strategies, I’m long the S+P and short gold.