From my newsletter on Saturday:
“So while it is not common to stay above this level for long, it has happened during periods of crisis, such as the 2008 financial crisis and the Russia Ukraine war. In both cases, once price lost that level, it led to quite significant corrections. So I do want to highlight how important this level is. The fact that we have closed above it could indicate further upside in the short term.
That being said, I do not think the global economy can sustain oil at these prices for long. And if you relate those previous periods where we traded above this level to what was happening globally at the time, it starts to fit into that problem reaction solution dynamic.
We clearly have a problem here. The next step is the reaction, and then ultimately the solution. Since 2008, the consistent solution has been money printing to stabilise the system.
If you look back, oil collapsed after 2008, and then when we approached similar levels again around 2014, we saw another major collapse. That period was likely due to Russia’s financial crisis and the annexation of Crimea, rather than a single defined crisis like 2008, but it still resulted in a sharp repricing.
Each time we reach these elevated levels in oil, we do not stay there for long, and then we see a collapse. That collapse is usually driven by some form of intervention or solution to the problem.”
Oil has only currently backed off to the $95 ish level, which you could argue is still a higher low.
I think this week everyone will be on high alert. I personally don’t trust the extension and peace, even though I want it to be true.
With that being said, I keep saying how good of a buy crypto is right now if we look at the weekly timeframe for example, so it’s difficult one.
$SPY pre market back at 675 is mental. That was the level I sad we could bounce to before coming down further.
We need to assess now if risk on is back in the room or if this is just a ST bounce for equities in a larger downside move.
Interesting times
