Oil has been on a downward trajectory since June as:
Below, we analyze the recent flow and likely impact on prices.
Labor shortages have been one of the biggest obstacles for increasing production. As the chart shows, employment increases always lag the increases in price, exhibiting the stickiness in increasing production.
Enforcing this, the number of drilled, but uncompleted, oil and gas wells (DUCs) rose for the first time in more than two years. This happens to be the longest streak ever on record according to the EIA. Cost inflation isn't helping companies with well completions.
Gasoline inventories are well below their seasonal average, approaching the lows for the last 10 years. Seasonally, we expect stocks to build in recent weeks, which should relieve some pressure at the pump.
The typical flow of gasoline from Europe to the US has been stagnant in recent weeks, which isn’t helping the situation.
The EU sanctions on Russian crude oil and products come into effect in early December and February respectively.
Janet Yellen stated that the US wouldn’t directly stop anyone from buying Russian oil, however, the sanctions aim at logistics by disallowing insurance, ship and finances to be used from the West.
Combining the fleets of Russia, China and India allow sufficient infrastructure to move almost all of Russia’s oil.
The real question remains whether lack of insurance would cause the demand for Russian oil to drop. This scenario would mean that a significant amount of Oil would be taken off the market.
China has always been the marginal consumer of oil and products. Reopening China would boost demand across the barrel.
China has finally amended its Covid Zero policy, by reducing quarantine time. According to flight schedules, domestic flights are set to increase by more than 60% over the next month, assuming these aren’t cancelled.
It has been a long week for BTC, ETH, and the rest of the crypto market, as they have been pulled down amidst the FTX drama. BTC has dropped below the $17,800-$25,000 range it has been consolidating in since June, hitting lows of $15,500. ETH, however, has had slight alpha on BTC throughout this five-month consolidation period. From June’s low of $900 to August’s high of $2,000 (+125%), ETH outperformed Bitcoin’s move from $17,500 to $25,000 percentage-wise. Since BTC has made a new local low of $15,500 this past week, ETH still remains about 40% above its June’s low, hovering in the $1,200-$1,300 range. This is a sign of relative strength for ETH.
A break below $1,100 can send us to test June lows and likely lower. A break above $1,350 on ETH can send us to the $1,500-$1,600 range. The Producer Price Index report is being released on Nov. 15th. It is possible that positive words can act as a catalyst to propel ETH higher in the short term after this recent pullback. Market liquidity is still low, so if we test the $1,500 range, I think we’ll head lower shortly after, as the last test of $1,600 was a rejection of the head and shoulders breakdown level. This is identified on the chart by the rejection of the diagonal white line.
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Rejection of the $18,000 level sends us lower to $12,000-$15,000. A break above this same level and we can see a move back to $20,000 in the short term. If we see a move to $20,000, it’s more likely we head lower. I am bullish long term and bearish in the short/mid-term due to the recent market uncertainty, fear, and illiquidity. Macro-wise we are likely close to the cycle bottom. Since the $20,000 multi-month support level has been broken, the next level of support is around $12,000. This zone is a previous breakout level from 2020 which is likely to be tested.
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SPY/SPX has had a positive reaction to CPI numbers and has moved up from recent lows of SPY $350 to test September highs around $400. This is a promising reaction from equities. I foresee a move to $420 from here. Rejection of the $400-420 level can send us to new lows around 2020 support levels of $340. However, if we clear $420 and get positive FOMC numbers, we can potentially test early-2022 levels around SPY $440-460 into the new year.
In reaction to CPI coming in under expectations, bond prices across the yield curve experienced a substantial rally on Thursday, with 25-35 basis point declines in yields intraday. Yields move inversely to bond prices. Yields were above 4% towards the end of October for the first time since 2008 as a result of the Fed’s tightening monetary policy. 10yr yields have been rising, which means investor demand for riskier assets like equities and crypto is high.
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Crypto in itself is a volatile environment, more so than a traditional trading ecosystem, and navigating this type of environment can be taxing on one’s mental health. One of the best things you can do in times like these is EDUCATE YOURSELF. If you are playing in this market without basic knowledge of the technology or the fundamentals, I challenge you to start asking questions. Expanding your network to surround yourself with people who can answer those questions.
There is a never ending wealth of knowledge to be discovered in crypto, and the best way to learn is from people already familiar with these concepts. When you can understand the underlying meaning of your investment, your mind is less likely to cause you to make irrational decisions based on misunderstanding.
Crypto’s success is directly reliant on the community’s faith in its cause, and our ability to effectively relay that confidence to others so that they too can understand the use case of crypto and why it is so important so that we can avoid situations like this past week in the future.
In light of recent events in the crypto market, it is imperative to remind people how critical it is to maintain healthy habits to establish a steady foundation for your mind’s protection from a market ripe with anxiety and uncertainty.
A point of struggle can be learning when to take a step back. When things take a turn for the worst, our instincts tell us to fight harder. Though this drive can make a positive impact it can also lead us to make financial decisions quickly and without sufficient research. Making these choices in a state of emotional turmoil can cause HUGE losses that take a toll on our mental health. When things go sour, breathe and take a step back. There is no further harm in coming back to it later. Acknowledge that in this market losses may happen, how we deal with a loss from that point forward can dictate our careers.
Every week I’ll share some strategies and a challenge to help you keep your body and mind healthy. Remember that your brain is as strong as your body. We can’t deprive ourselves from the tools necessary to nurture success.
Take a walk and get some sun. Many of us are cooped up in our homes in front of our computers. We forgot to take the time to get outside and soak up some Vitamin D. Some benefits of moderate sunlight exposure are:
This is one of my favorite side dishes to make for Thanksgiving or Christmas, or for any meat based dinner. It's simple and easy to make and doesn’t require a lot of work.
Steps :
Pair this with a 2014 Evinco Winery DAO Cabernet Sauvignon, to cut through the richness of all the food. Get your 2 free bottles by minting: https://www.evinco.wine/
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