If the enemy of my enemy is my friend, is the friend of my enemy my enemy? The relationship between the US and the Saudis has been through plenty of ups and downs, but it’s been years since it was as fraught as it is now.

The West is trying to put the screws to Russia, which in turn is trying to put the screws to the eurozone by enlisting the help of the Saudis, who are arguably US allies… Around and around it goes, with a decision due out later today that might spell a 2MM bpd (about 2%) cut in production.

Will it be enough to revive the correlation between oil/gas prices and interest rates? ES is positioned to at least backtest its SMA10.Stay tuned.

continued for members…

Oil and gas prices have already risen substantially since their Sep 26 lows. After a very strong positive correlation, the 10Y had taken off without RB’s participation.The algos are perhaps seeing the writing on the wall, with the gap higher in the 10Y receiving more attention than VIX’s refusal to reflect any risk.

It was enough to put a damper on EURUSD’s run for its SMA50… …and DXY’s nosedive for its… …while USDJPY remains bullishly detached from reality. Keep in mind that, most of the time, the VIX suppression equity rallies we get occur in advance of expected bad news: a Fed rate hike, CPI report, etc.  Since much of the inflation/interest rate environment will depend on what OPEC+ does today, the rally of the past two days makes a lot more sense.

The initial support will come in at the SMA10. Below that, things could get ugly in a hurry.

Though VIX is still working overtime to prevent that from happening.

It should be an interesting day.