It looks like the seasonality Gods are really serious about their work. Oil stocks are posting their 8th consecutive red candle today. Complete apathy in the sector now.
As you can see from the graph above, oil stocks, generally, do not do well between the months of May- January.
The entire basic materials group is under pressure — lower by ~5% the past month.
The Exodus oscillator is low, but not extremely low. We are not at oversold levels yet.
If you take out the recent highs — you can see there is a FAGbox for oil and we’re now probing the lower portion of it.
None of this scares me without HYG/JNK going lower. On a day like today, with WTI down by 3%, you’d expect to see downward action in the junk bond market — but nothing of note.
I recently heard an analyst discuss oil and he said that chemical stockpiles were heavily built over the past 3-6 months — but that waned recently and did not correlate with the price jump in crude. This was atypical and was indicative of market manipulation and not true end user demand, justified for the rise in oil. I don’t know what the real truth is, only that we should keep an eye on crude and definitely bonds. If you see a break in HYG below $86, get some hedges. For now, I am being patient — 65% cash.
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