Hard to Keep Crude Down

Crude stocks are way underperforming crude today, with WTI up more than 3%. I suspect people view the $70s as a floor since the White House said they’d refill the SPR in the low $70s. They also said they’d release more oil should it spike and they also said they’re applying a price cap on Russian oil, rumored to be in the 60s, yet The Kremlin said they would not sell crude under any price cap conditions.

So there is that.

Early going risk appears off, as downside is led by the small caps. I’ve taken on a hedge via TZA and sit with moderate gains of 30bps.

For the balance of the day, I assume commodities will attract traders, since oil, gold, and copper are all sharply higher. I also assume the NASDAQ will turn lower, as the “FUCK JOE BIDEN” trade takes hold.

One thing is indelibly clear: military spending is going UP worldwide. American industrials are leading higher, mostly thanks to strength in the petro-chemical markets. Any substantial downside in crude and commodities would all but ruin this trade.

Tech is dead. Relying on consumer goods and services seems high risk given the economic outlook and basic materials are incredibly volatile. It’s not easy to hide in this market, especially in banks. Where can you put your money? TR comes to mind.

It’s not probable that we’ll see the economy bottom in 2023. This downturn is likely to last through 2024. Given the market is barely down for the Dow and moderate losses for the SPY, we still have substantial downside left if the GDP and jobs numbers continue to weaken.