Hi Traders,
We are BACK. After a huge success in Florida we are ready to roll this week. I'll be back live at 10 AM ET for the State of the Market/Ticker Highlight show.
As we sit here oil is up 15 bucks and is topping 100 in the future. Is this too far too fast? It might be… but traders and firms are going to squeeze energy higher until the squeeze breaks: And it doesn't mean that the Iran war ends. It means those trying to get out of shorts, those hedging, and those pushing futures higher finally run out of steam.
The ‘memefication’ of the market continues, Oil is now doing what gold and silver did a few weeks ago. While there are some fundamental reasons this number is moving, I think it's gotten just a touch overdone here (and by that I mean way overdone).
Needless to say markets are not liking this move in Oil. As I write this the S&P 500 futures are down over 100 points, Dow Futures are 700 and Nasdaq Futures are down 500 points. To demonstrate how pressed the market is… VIX futures are in Full on Backwardation:
We are likely to see the VIX well over 30 on Monday morning. When VIX is backward, throw out whatever logic you have about the market. Fundamentals DO NOT MATTER. The same holds true for Technicals… throw them out.
My guess is Monday morning is the peak for VIX and the peak for selling, but there is no guarantee that we do not keep moving lower all week. Turnaround Tuesday is not promised.
So when do I know to jump in? I am going to be looking for the market to start to rally and an aggressive amount of selling of volatility. Alternatively, we are lower on Tuesday but the VIX starts to pull back.
Alternatively, now that the market is likely going to be breaking some recent lows it is worth it to look at some of the stocks getting torched and ask yourself if there is anything worth buying? Is there an opportunity to buy into industrials, energy, and maybe even some mag 7.
The best approach for the short term… is short term. 0 DTE and 1 DTE are THE play right now. Minimal overnight exposure and with this volatility TONS OF opportunity.
One to Sell
Oil, I know oil can keep going and going and going. But at some point in the next week there will be a chance to short the entire complex. Short USO, OIH, OIL, and XLE. Now, that being said, if one wanted to play a short oil play NOW, I would be looking at a bear put spread in USO and a long call position in XLE or in XOM/CVX straight up. I am not suggesting a big short on USO naked at this point…but it is coming.
One to Buy
If we have learned anything, it's that energy is more and more important. The US and the world needs clean reliable energy….the only economic way to accomplish this is nuclear. SMR has had a rough couple of months, but it is finally at a spot where I find it exciting, as a trade and as a buy and hold stock. I like NuScale to head back over 20 and in the near term I like it back over 13.
Mark Sebastian