Crude oil looks like it wants to test $38 again. It has been extremely weak the past two weeks, when equities have been ripping higher. However, since crude oil went over $50 on October 9, and its now trading around $43, you had net fund flows of $133M into UWTI, triple leveraged crude oil ETN, and $190M into USO, crude oil ETF. Those are really big inflows for UWTI, which only has net assets of $900M, which means you had about a 20% increase in shares outstanding in just two weeks. UWTI is the most speculative of the crude oil ETN/ETFs, being triple leveraged with massive decay from daily resets.
Now we are entering the seasonally weakest part of the year for crude oil.
It looks like a disaster waiting for crude oil for the next 2 months. Crude oil usually follows the equity market, and it has been unable to keep up with the equity rally. Even with all the central bank actions, crude oil can't rally. In fact it is doing the inverse, going down while equities are going up, rare to see these days.
This crude oil weakness will keep a very strong bid for bonds, which just loves a weak oil market, more so than a weak stock market. Bonds are probably the most bullish thing I see right now.
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1 comment:
Well if you still believe in the new low theory today could be the day to get short. I went long USO calls yesterday and dumped today at 14.40. Not sure about new lows but the fundamentals aren't a screaming long.
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