Wednesday, June 13, 2012
CME: Crude Oil Steady Ahead of EIA Inventory Report
I am still expecting a rollover with no production cuts from the OPEC meeting. I am still of the view that the Saudi's will keep oil production high even if oil prices continue to decline. I believe part of the strategy is to add pressure on Iran with lower oil prices and thus hope that it motivates Iran and the West to eventually negotiate a deal over Iran's nuclear issues. The next Iran/West meeting is in Moscow early next week.
At the moment most risk asset markets are still in a downtrend even after a short covering rally yesterday. The technicals for all of the markets are also suggesting lower values going forward. However, event risk will take over as the main price driver for all of the risk asset markets including the oil complex as the macro correlations remain very tightly linked. I believe there is a lot of trading and investing dollars sitting on the sidelines which is likely to remain parked in bonds and money markets until more clarity emerges from the major market headwinds. Following are just some of the main questions clouding all of the markets
Who will win the Greek elections?
Will the Spanish bank bailout actually go forward?
Is Italy next on the agenda?
Will the EU move to eurobonds?
Will contagion spread around to other EU countries as well as outside the EU?
Will the EU slip back into recession?
Will the US economy continue to slow?
Will China's easing result in a growth spurt for this meteoric economy?
Will the US Fed announce another quantitative easing program at their June meeting?
What will be the outcome of the OPEC meeting...production cut or status quo?
Will any progress be made at the next round of talks between Iran and the West?
If no progress is made does it quickly increase the likelihood of military action in the region?
There are more but I trust you all get the point as to the magnitude of the event risk to all of the markets over the next two to three weeks. All of the above have implications for the market and are likely to impact the direction of the markets...at least for the short term. In addition to all of the normal technical and fundamentals approaches you use for trading and investing for the next two to three weeks you must pay close attention to not only the outcome of all of the events but the 30 second news snippets hitting the media airwaves leading up to all of the events. The only guarantee is markets will remain volatile with sudden price reversals as we saw during Monday's US trading session.....
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