WTI has regained its losses of the past two sessions, jumping 4% after news of two tankers being attacked in the Gulf of Oman. This is happening on the eve of another leg down in the price of WTI and RBOB.
This is problematic for many reasons. As a major driver of equity prices, a rise in the price of oil has reversed futures fortunes — from a sharp overnight loss to a 10-pt overnight gain.
Many believe Trump is itching for a fight with Iran — the better to satisfy the neocons and earn Trump an opportunistic bump in the polls.
But, an increase in oil prices would put a serious dent in Trump’s campaign to lower interest rates. Higher oil and gas prices means higher inflation which makes it that much less likely the Fed will reduce rates any time soon.
It was one thing for Trump to threaten Iran on Twitter. It’s quite another for him to give Pompeo and Bolton free rein to retaliate for an Iranian provocation — whether real or Tonkinesque.
Stay tuned.
continued for members…
ES has yet to break out of the falling white channel.
If it does, SPX could pop up to test its .886.
It would likely require a breakdown by VIX — which has, so far, declined to do so despite many opportunities.
Bonds are obviously benefiting from the unease.
So far, CL has pushed slightly above its SMA10 but has not come close to breaking out.
If it can resist a breakout here, it still has plenty of interesting downside targets — depending on how serious Trump is about forcing the Fed’s hand. So far, the Saudis — who rely on Trump from a military and PR standpoint — have been happy to do his bidding. At what point does the rest of OPEC revolt?
To the extent the White House controls oil and gas prices, the Fed controls currencies and the bond market. Nothing has changed here. The USDJPY continues to signal a sideways market — though the breakdown of the yellow triangle and attraction of the .618 and lower Fibs continue to suggest lower prices.
Needless to say, a breakout by EURUSD and/or breakdown by DXY would be tough on stocks.
The 2s10s has pushed back up to the white resistance at 0.24.
I need to run my wife to the doctor to have her stitches removed. I appreciate everyone’s patience this past couple of weeks while I try to keep up the site while being a “single dad.” With her arm in a sling and with limited range of motion, my wife has been unable to do any of the cooking, laundry, driving, etc.
Hopefully the stitches come out today and she’ll be a little more mobile. If nothing else, this has been a great reminder of just how much she does on a daily basis!
I’ll be out for at least 2-3 hours — will catch up with things later. GLTA.