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Less Liquidity In Summer Months Could Lead To More VolatilityThe Memorial Day weekend is the start of the summer season. In many markets, seasonal factors can impact prices. The old saying, “sell in May and go away,” may not be applicable in the stock market as stocks have been on a rocky path lower in 2022. In commodities, gasoline, meats, grains, and other raw material prices often increase as demand peaks. Heating oil and other winter commodities often move to the downside. However, 2022 is anything but an ordinary year in markets. Thin markets are more volatile than liquid markets Market participants are tired and frustrated in 2022 Lockdowns over the past years could lead to extended summer vacations Lots of head-fake moves on the horizon Expect the unexpected- Volatility leads to opportunity Over the past two years, the global pandemic distorted prices. Stocks rose as artificially low interest rates made the stock market the only alternative with fixed income yields at historical lows. Rates are rising in 2022, with a hawkish Fed and falling bond market. Supply chain bottlenecks continue to plague commodities, and the war in Ukraine has only exacerbated pricing and availability issues. Mid-term elections in the US, and a Presidential contest in Brazil, a leading commodity-producing country, are on the horizon later this year. The geopolitical bifurcation between nuclear powers is another issue facing markets that reflect the economic and geopolitical landscapes. Market participants are exhausted as 2022 has brought a new set of concerns. We could see liquidity in markets dry up over the coming weeks and months as the summer has arrived, and vacations will limit participation in markets across all asset classes. Thin markets are more volatile than liquid markets Liquidity is a critical ingredient for smooth-running markets. Liquidity tends to reduce price variance as more market participants increase buying and selling interests at various levels. Commodities tend to be more volatile than other assets, sans cryptocurrencies, but some raw material markets experience far more volatility than others. Lumber and crude oil are two highly volatile commodities, but one has minimal liquidity while the other experiences far more participation. The daily chart of CME lumber futures shows that daily volume tends to be well below 500 contracts. Open interest at 2,293 contracts makes lumber an illiquid market. Daily historical volatility at over 62% is a function of the lack of volume and open interest, leading to price gaps and limit-up and limit-down price moves where buying disappears during bearish periods and selling evaporates when the price moves higher. Meanwhile, on a typical trading session, NYMEX crude oil futures trade well over 400,000 contracts, with open interest at above 1.81 million contracts on June 2. Daily historical volatility at below 20% reflects that the highly liquid oil market has buyers and sellers at all price levels. The bid-offer spreads in liquid markets are far tighter than in illiquid markets. As liquidity declines, markets tend to experience far more price variance. Market participants are tired and frustrated in 2022 In early 2022, market participants were breathing sighs of relief as the global pandemic was beginning to fade in the rearview mirror. Health concerns may have declined, but financial woes increased with prices. Monetary and fiscal policies planted inflationary seeds that have caused prices to explode higher, while supply chain bottlenecks continue to exacerbate inflationary pressures. Meanwhile, the Russian invasion of Ukraine is another crisis following on the heels of two years of pandemic panic. Sanctions and Russian retaliation exacerbate inflation. Moreover, Russia’s “no-limits” cooperation with China creates a geopolitical bifurcation of the world’s nuclear powers. We live in interesting and exhausting times, with people tired and frustrated with the events since 2020. Lockdowns over the past years could lead to extended summer vacations Lockdowns ended in the US as vaccines went into arms. People have returned to work and school. In China, the COVID-19 restrictions appear to be easing. In early June 2022, the coming summer months offer the opportunity to rest, relax and recharge internal batteries for the second half of 2022. The demand for travel, hotel rooms, and other vacation-related consumer products has soared. Inflation and supply chain bottlenecks have only increased prices, but the demand is robust. As market participants take a few weeks off over the coming months, they are likely to turn off their screens and ignore the market action that could interfere with good times with friends and family. Increased vacations may bolster earnings for travel-related businesses, but it will reduce market liquidity as a vacation for many includes a rest period from watching or participating in markets across all asset classes. Lots of head-fake moves on the horizon As liquidity declines because of a lack of participation, markets will likely become a lot bumpier over the coming weeks and months. Selling could lead to downdrafts and buying may create rip-your-face-off rallies. These events cause head-fake moves that can cause even the most experienced traders and investors more than a bit of indigestion. A decline in liquidity could dramatically increase price variance. The geopolitical and economic landscapes will not take any vacation during the summer of 2022. Expect the unexpected- Volatility leads to opportunity Expecting the unexpected will reduce the stress-related with sudden market volatility. Moreover, higher price variance increases opportunities for nimble traders and investors with their fingers on the pulse of markets. Approach markets with a sold risk-reward plan that avoids open-ended risks. Even though declining liquidity can cause markets to rise or fall to irrational price levels, always remember the current price is always the correct price because it is the level where buyers and sellers meet in a transparent environment, the marketplace. Do not be afraid to take small losses and remember to take those profits or adjust risk levels to protect them when markets reach targets. Trading or investing with a plan and sticking to it avoids the ego-related mistakes that cause us to believe we are always right, and the market is wrong. The market price is never wrong. Meanwhile, combinations of put and call options can protect the downside, hedging portfolios while allowing for upside participation that will enable you to enjoy your time off from the daily grind. Enjoy the summer but keep your eyes open for opportunities. Adjust your mindset to expect the unexpected and embrace the higher volatility that comes alongside lower liquidity. Price variance is a nightmare for the passive, but it creates a world of opportunity for the dynamic. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
LEducation
by Andy_Hecht
1
$TSLA tweet about it 👁‍🗨*This is not financial advice, so trade at your own risks* *My team digs deep and finds stocks that are expected to perform well based off multiple confluences* *Experienced traders understand the uphill battle in timing the market, so instead my team focuses mainly on risk management* My team entered electric vehicle company Tesla $TSLA today at $881 per share. Our take profit has been set at $1100. Elon Musk: "Tesla has diamond hands" Our entry: $881 Take profit: $1100 If you would like to see more, please like and follow us @SimplyShowMeTheMoney
NASDAQ:TSLALong
by SimplyShowMeTheMoney
2
Consolidation in the Oil Market- Do Not Get Too ComfortableIn early March, when Russia invaded Ukraine, the oil price soared to the highest levels since 2008. While the energy commodity did not reach a new record high, it came close. Nearby ICE Brent futures reached $139.13 per barrel, only $8.37 below the 2008 record peak. The NYMEX WTI futures moved to $130.50 per barrel, $16.77 below the 2008 high. $100 has become a pivot point Product prices and crack spreads have soared- Consumers require products Russia and OPEC have little interest in helping the US and Europe SPR releases are symbolic- The selling will require future replacement Crude oil is building cause for a move to a new all-time high Meanwhile, the 2008 peak in the oil market did not contain gasoline and distillate prices, which have soared to new all-time highs in 2022. Crude oil is the primary input in oil products, as refineries tend to process WTI into gasoline and Brent into distillates. The rise in product prices is a warning sign that crude oil demand remains robust and higher prices are on the horizon. Crude oil has corrected from the March high, but the medium-term trend since the April 2020 low remains higher, and products are screaming that new all-time highs are on the horizon. Markets reflect the economic and geopolitical landscapes. The highest inflation in over four decades, US energy policy, and the war in Europe are factors that will likely draw new upside chart points for crude oil over the coming months. $100 has become a pivot point The $100 per barrel level in NYMEX crude is a critical psychological level that has become a base price or pivot point for the energy commodity since February 2022. The above chart highlights that after NYMEX crude oil spiked to $130.50 per barrel in early March, the price corrected and settled into a trading range around the $100 per barrel level. The nearby futures contract probed below the pivot point in March, April, and May, but each attempt to correct attracted buying and pushed the price back above the psychological price level. On Friday, May 20, the July futures contract settled at the $110.00 per barrel level, with the trajectory favoring the upside. Product prices and crack spreads have soared- Consumers require products Crude oil is the input in oil products. Consumers are either direct or indirect buyers of gasoline and distillate fuels. The price action in the products suggests robust energy demand and supports higher crude oil prices. Crack spreads reflect the refining margin for processing petroleum into gasoline and distillates. On a quarterly basis, gasoline crack spreads rose to a new all-time high of $58.67 on May 16 and was above the $47.90 level on May 20. The heating oil crack spread reached $74.05 per barrel on May 3 and was at the $43.80 per barrel level on May 20, above the 2012 previous all-time high. Heating oil is a proxy for other distillates, including jet and diesel fuels. The elevated crack spreads tell us that the demand for oil products remains high even with crude oil above $110 per barrel. Demand supports higher oil prices in late May 2022. Russia and OPEC have little interest in helping the US and Europe After years of suffering from US shale production that pushed US output to a record 13.1 million barrels per day in March 2020, US energy policy did an about-face in January 2021. Addressing climate change under the Biden administration handed the petroleum market’s pricing power back to the international oil cartel and Russia. Since 2016, Russian influence on OPEC policy has dramatically increased. Saudi Arabia and Russia now control the energy commodity as the US has taken a backseat because of stricter regulations, fewer pipelines and leases, and less production incentives. Moreover, encouraging alternative and renewable fuel production and consumption has come at the cost of inhibiting traditional energy output. Meanwhile, oil and oil products continue to power the world, and the US, making the US and European allies more dependent on foreign sources. Warren Buffett once said that you find out who is swimming naked when the tide goes out. It is low tide in the oil market, as Saudi Aramco replaced Apple (AAPL) as the world’s most valuable company last week. Balancing Saudi Arabia’s budget requires crude oil at the $80 per barrel level. With Brent crude oil north of $110 per barrel, the world’s leading producer is experiencing a profit bonanza. While the US, Europe, and other allies have slapped Russia with sanctions after it invaded Ukraine, China, and India, the world’s most populous countries continue to purchase oil from Moscow, allowing revenues to flow to the aggressive Putin regime. The bottom line is Russia and Saudi Arabia is not predisposed to do any favors to the US, Europe, and other “unfriendly” countries in the current environment. The Biden administration has asked Saudi Arabia to increase its output, but the pleas have fallen on deaf ears in the Kingdom. SPR releases are symbolic- The selling will require future replacement President Biden has authorized crude oil sales from the US strategic stockpile. The latest release is for a record one million barrels per day. The US Strategic Petroleum Reserve is an emergency supply for times when shortages develop and for military purposes. Each barrel sold needs to eventually flow back into the caves that hold the petroleum. The more the US government sells, the more it will have to buy in the future. Meanwhile, SPR releases have historically done little to push oil prices lower. The oil price remains north of $110 per barrel despite the current sales. SPR shales may have symbolic political appeal, but they have little utility in the current environment. Selling crude oil from the SPR is not the answer to the current high energy prices; increasing drilling and production is the only effective means of pushing traditional energy prices lower. Meanwhile, there are no plans to ramp up US production to take the leadership baton from Saudi Arabia and Russia. On May 13, the Biden administration canceled an Alaskan oil and gas lease sale. Aside from ceding control of oil and gas prices to Moscow and Riyadh, the higher prices are potent fuel for US inflationary pressures that continue to rise. While the Us central bank has tools to deal with demand-side macroeconomic problems, the rising oil and gas prices are a supply-side factor that requires a solution, not in the central banker’s toolbox. However, the Washington DC administration has no plans or desire to address energy market dynamics by increasing US production. Inflation and OPEC+’s dominance will continue to rise. Moreover, the high oil prices are funding Russian aggression in Eastern Europe; the rising petroleum revenues support the war effort and the potential for further expansion. Crude oil is building cause for a move to a new all-time high The current targets for WTI and Brent futures are the early March $130.50 and $139.13 highs. Above those levels, the all-time 2008 peaks at $147.27, and $147.50 are critical technical resistance levels. Crude oil is consolidating and digesting the move to the highest prices since 2008. Bull markets rarely move in straight lines, and correction and consolidation periods are constructive and healthy. Crude oil is building cause for another bullish leg that could take prices to the $150 level or higher over the coming months. The Saudis and Russians will sit back and cheer as the price rises, Aramco’s market cap, and profits rise, and Russia fills its coffers with the spoils of its economic war with the US and Europe. Given the rise in refining margins, consumers are already paying record prices for oil products. We may be looking down at $5+ gasoline over the coming months and years. We remain bullish on crude oil, but the road to higher prices could be very volatile. Buying dips in crude oil and oil-related equities could be the optimal approach to the market for the rest of 2022 and beyond. Don’t get too comfortable with the $100 pivot price for crude oil. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
NYMEX:CL1!Long
by Andy_Hecht
1
$XOP Smells like distributionXOP to me needs to cool off after this monster up leg. Starting to smell like distribution with lower highs. A monster breakout is possible, but even being bullish I'd like a dip to $120 zone before the next up leg. Daily - seeing some bearish divergence on the RSI Weekly - top of channel rejection (so far) with Bearish MACD cross and momo turning down Monthly - we're at the 2015 resistance line and an RSI approaching over bought territory 4HR - bearish divergence in MOMO and lower highs with MA turning down I'm just not a buyer here, started a short position will add upon further confirmation JUN 130P Cheers !
AMEX:XOPShort
by FriscoTrades
ZNOG | 1st Stage BreakoutJust some simple T/A here on this, no real fundy's or info to share there but it's O&G which isn't going away just yet. Some key notes : I like this for the cup & handle 1st stage breakout characteristic but these OTC's tend to do pretty deep retracements. We TP'd a small 30% profit as the right side of the cup shaped up nice and peaked. Cup & Handles classically produce 3rd and 4th stage breakouts so we would look to swing the next two bumps. The 200 EMA is rounding out nicely and we could see a golden cross soon but until then, it's not unusual to see price 30% below 50 EMA so we set out 2nd of two buys down at the 0.786 Fib level. The 0.618 looks like a no brainer though despite some higher volume down days (which show to be in trend decline. As always, not investment advice, DYOR and Good Luck! Box
OTC:ZNOG
by FudBox
Volatility 19 May 22 Energy Commodities Futures Crude Oil CL Futures 19 May 2022 Based on the HV measures from the last 5625 candles our expected volatility for today is around 3.44% However, in order to increase our accuracy I am going to use a 1.25x multiplier => 4.3% This is translated into a movement from the current opening point of 4.577 With this information our top and bottom , with close to 84% probability for today are going to be TOP 111.56 BOT 102.36 Natural Gas NG Futures 19 May 2022 Based on the HV measures from the last 5625 candles our expected volatility for today is around 5.01% However, in order to increase our accuracy I am going to use a 1.25x multiplier => 6.27% This is translated into a movement from the current opening point of 0.5 With this information our top and bottom , with close to 85% probability for today are going to be TOP 8.757 BOT 7.723
CBOT:ZO1!
by exlux
Henry Hub Natural Gas futures showing slowing momentumHenry Hub Natural Gas futures showing slowing momentum across the futures curve up to Jan 2024 ($NGF2024). Recent geopolitical risks i.e. The Russian invasion of Ukraine, have pushed the prices of both spot and futures of commodities higher. Natural Gas futures across the curve are tracking each other with a tighter spread till Jun 2023 implying that the market participants expect the prices to remain elevated for a longer time. However in the short-term, the price action shows an exhaustion by bulls forming a ranging pattern with a possibility of a reversal. Central banks around the developed world highlighted in their Monetary Policy Statements this May that they expect energy prices to remain elevated for the next 18 months. I'll definitely be watching out for the impact of the policy tightening regime - which we are in now - to the demand side of the economy, and it's second-order effects on gas prices.
NYMEX:NG1!
by GrizzlyBearBee
#NATGAS - Surely not?Hi all! This chart is pretty self explanatory and tells a lot of potential stories. As we all know, NATGAS is a beast of it's own and often technicals are embarrassed by NATGAS movements. But considering inflation, whispers of war, absurd weather, perhaps this isn't as crazy as it sounds. Anyhow, I really wanted to put this out there as a lot of technical indicators are suggesting a bull run. Weekly and Monthly RSIs are both towards oversold and the current political and economical situations point at a commodity bull run, especially is Oil and NatGas.
NLong
by SkyTrees
4
$USOIL purely technical 👁‍🗨*This is not financial advice, so trade at your own risks* *My team digs deep and finds stocks that are expected to perform well based off multiple confluences* *Experienced traders understand the uphill battle in timing the market, so instead my team focuses mainly on risk management !! This chart analysis is for reference purposes only !! $USOIL appears to be on a pathway to retest its support zone for the third time. If this zone is breached, we expect $USOIL to head into the $80-$90 range. This scenario is purely technical. If you want to see more, please like and follow us @SimplyShowMeTheMoney
TVC:USOILShort
by SimplyShowMeTheMoney
Why has the Russian ruble not collapsed yet? Russia’s efforts to prop up the ruble appears to be working despite sanctions imposed by Western countries aimed at cutting the Kremlin’s access to external resources and crippling the nation’s ability to fund its war against Ukraine.   Last week, the ruble surged to a more than two-year high against the euro and the US dollar, recouping its losses during the war. The rally was triggered by Russia’s last-ditch attempt to avoid defaulting on a eurobond on Friday.   Russia’s finance ministry paid $564.8 million in interest on a 2022 eurobond and $84.4 million on another 2042 bond, the ministry said Friday. Both payments were made in US dollars, marking a reversal from its previous threat to pay its debts in rubles.   To begin this week, the ruble has continued its strong performance, with the USDRUB down almost 3%. As it stands, Rubles are exchanging hands at less than 69 per USD. Rating cut to selective default Prior to the payment of these bonds, Russia had earlier paid its dollar-denominated bonds in rubles, triggering a rating downgrade by S&P Global Ratings to “selective default.”   The rating agency said investors won’t likely be able to convert those payments into dollars equivalent to the amount due as sanctions on Russia are predicted to worsen in the coming weeks.     Gas for ruble In a bid to bolster the ruble and retaliate against Western sanctions, Russia, one of the top oil-producing countries worldwide, required “unfriendly” buyers of the country’s natural gas to pay in rubles. While many European Union leaders were quick to reject the Kremlin’s demands, one of Germany’s biggest energy companies, Uniper, said it was ready to buy Russian gas by converting its euro payments into roubles.   "We consider a payment conversion compliant with sanctions law and the Russian decree to be possible," a spokesman was quoted by BBC as saying recently, adding that the absence of Russian gas “would have dramatic consequences for our economy.”   Russian national energy giant Gazprom recently cut off its gas supplies to Poland and Bulgaria due to their refusal to pay in rubles.   Commodity powerhouse Many countries’ reliance on Russian oil and other commodities like wheat has helped the ruble avoid collapse and may play a role in supporting the currency moving forward.   Vyacheslav Volodin, a top Russian lawmaker, over a month ago said Russia should demand ruble payments for other commodities like wheat, fertilizer, and lumber, adding that Western governments have to pay for their decisions to sanction Russia.  
U
by BlackBull_Markets
4