Don’t Burp.
As I’ve been patiently observing and learning (which there has been a lot of these last few years) I’ve been coming to a conclusion.
That conclusion that I have arrived at is that we’re in an environment where everything trends down, aside from the $USD. This includes energy in the near term. Let’s walk it out.
All prices are determined by cost of energy, down at the base-layer, fundamental level. Civilization’s ever-improving capability to organize is enabled by iterating upon manipulations of energy. From the use of rocks & sticks, to the wheel, to the wagon, to the road, to steel, and so on. All are tools that allow for better forms of human organization and cooperation. And guess what, in order to reach these higher iterations of organization (and cooperation) we require cheaper access to more consistent sources of energy with greater energy density; from fire, to whale oil, to hydrocarbons, to nuclear.
So, back to the topic at hand. What is labeled as “the first world” is falling down the proverbial hill to the conclusion that much of the developed world has unwittingly meandered into a state of energy insecurity. Between reliability and cost in particular. Now we’re seeing defensive reactions to the cost of energy, aluminum and steel of my particular interest (which I’ve written about here), resulting in curtailing of operations. What this entails is that introduction of product to the market has been cut-off in the current, but these effects take time to reverberate across markets, like a ripple across a lake. Meaning that true impact takes relatively large amounts of time to saturate across the market(s).
What this means is that, with these defensive de-industrialization strategies, we appear to be charging headlong into an environment where in our moment of need (which is now and into the medium-term) we run the risk of not having enough resources to expand as desired. It’s kinda hard to expand hydrocarbon production operations when the industry is already running into difficulties with acquiring materials for E&P, let alone to produce the piping infrastructure to facilitate associated natural gas capture.
Yet, oil markets continue to sell-off as markets begin to wrestle with the looming reality that a Xi Pivot on Covid-Zero is more a fantasy than the imminent reality that many of the MSM market “experts” have been preaching for the last few months. Not unlike those deeming a Fed Pivot being imminent — with many of those groups being one in the same.
We’re effectively seeing a Down-Only market TREND. Emphasis on “trend.”
Housing: rolling over.
Used cars: down only.
Equities: blood-bath, especially in tech — lulz.
Government debt: historic blood-bath.
Crypto: LOL.
Bitcoin ($BTC) : remains to be seen what is left1.
We’re now in oversold territory for the short-term, which means position covering, hedging, and re-positioning. With the likely lack of interest in market participation, we are pretty well primed for a bear market rally. Perhaps we’ve already seen all that any attempt at a rally could muster, it remains to be seen.
Mix this with all of the excess liquidity that is remaining sidelined, and Jerome Powell’s clear intent on utterly destroying the offshore dollar market, with pain in domestic markets simply acting as collateral, and necessary, damage.
Energy
The interesting thing as well here, is back to the energy situation. The fact that energy is selling due to short-term demand destruction… And the necessary developement that will be required to support the actual solution(s) to our current situation… Investing in energy should be aggressive, which we are admittedly seeing with Exxon, Chevron, and ConocoPhillips to name a few.
Monthly Charts:
*links are provided for each, just click on the image.
ConocoPhillips COP 0.00%↑
Exxon Mobil XOM 0.00%↑
Chevron CVX 0.00%↑
All of these guys are in the same position: price discovery, AND slowing momentum. Of note being the potential bearish divergences on these HTF levels.
With crude oil futures selling off, as previously stated.
Crude $USOIL, on the Daily timeframe:
Oil has been trending down. Yet, I would think that energy is done with the disconnection from reality, especially considering this PA on the 1D timeframe. But markets are NOT perfectly efficient, nor rational. So it is possible to see things sell, but I wouldn’t think this to be probable. Especially with these ludicrous SPR sales by our Geriatric-in-Command.
My Position
I think we’re in a general Down Only, Welcome to Goblin Towne, type environment. Especially when considering the amount of uncertainty out there. World leaders don’t know wtf is actually going on on the ground. And the energy players can’t even BEGIN to start working on the solutions because of the environmental regulations that have been preventing them since 2015.
Expect volatile swings, not unlike those charts from pre-WWII Weimar. Expect these markets to be as vertigo inducing as your burpees at your nearest CrossFit gym.
Stay salty.
Bitcoin tends to be the first to bottom. It’s more liquid than most in the sense of being a freely 24/7 traded asset that is the most pristine collateral. On top of that, 99% of the global market sees Bitcoin as a “risky asset” when those of us who understand it understand that it has the least amount of risk as any financial asset in existence. SO, that means that BTC tends to be the FIRST thing liquidated to meet liabilities. Are we bottomed? Idk. I doubt it.