Oil Blows Through The 200-Day As Upside Panic Kicks In
Black gold
On January 9 we outlined the squeeze case for oil and we wrote: "Oil is smashing through the negative trend line. Even more notable, crude is set to close above the 50-day, something we’ve barely seen in recent months." Fast forward to today and oil is now trading well above the 200 day MA. Note we are $2 from the big negative trend line. Chasing here is getting late, although momentum is rather impressive.
Source: LSEG Workspace
Upside panic in a pic
Oil volatility, OVX, has exploded to the upside over the past sessions. This is what a furious squeeze does, forces people to chase upside exposure.
Source: LSEG Workspace
Last time we checked...
...oil was a commodity, and commodities have been in fashion.
Source: LSEG Workspace
CTAs in oil
A few weeks ago, upside convexity in oil was significant. That has shifted during the squeeze as CTAs quickly chased momentum. While some upside convexity remains, the setup is no longer as clear or as attractive as it was back then, at least not from a front run CTAs perspective.
Source: GS
Imagine
Recall what Hartnett pointed out in December: "...all commodities will soon look like gold". Not assigning a very big probability to this, but still...
Source: LSEG Workspace
That inflation connection
US 10 YR breakevens surging in tandem with oil.
