If I absolutely had to do something in oil, I would want to be on the short-term buy side and on the long-term sell side. The news of OPEC+'s expected production cut came and they first sold the market and then started buying.
Now, this is exactly the environment where small investments say "here's the news, I'll close my eyes and go short". Often in such times, they first make very little money, then make a big move in the opposite direction and slap the small investor again. In other words, sharp upward movements in oil should be expected in the next 10 days. But if a strange growth story does not come to the fore in the coming weeks, there will be a little more weakness with oil slipping below $54.50.
The fall in prices will have a positive effect on inflation control in many countries, including the US. It will also create a good environment for the US to replenish its strategic oil reserves. In fact, considering that the US melted its reserves in 2022 when oil was at much higher prices, it will even make a very serious profit while replacing them now.
US stock indices have made dip buyers smile once again. In fact, I had also assessed last week that technology stocks in particular could make a strong rally. However, the point reached is quite critical for both the S&P 500 and Nasdaq 100 indices. Because we see that the rise has come without spreading to the bottom and without moving the market width indicators too much, and both major indices have reached their 200-day moving averages.
Why is market width important? Because the best indicator of whether the movement has spread to the bottom is these market width inducers, and unfortunately I see that the rising index is not accompanied by the general stocks and that stocks with a certain weight are working. This also presents 2 options, either the relatively small ones will follow the big ones who have gone, or the rally will fade here. Right around the 200-day moving average…
It is free to be in one of the 2 camps as to which one will happen. At this point, I will talk about a change in market positioning. Hedge funds have reduced the number of short positions in VIX contracts from approximately 26,000 to 9,000 from the previous week. In other words, no further decline in VIX is priced in.
Of course, it would be a bit of a novice's job to interpret this as VIX will rise, which means the indices will fall. Because VIX is already a value that melts and falls on its own in the futures contract basis when nothing happens. Therefore, we cannot say that the indices will fall due to the decrease in positions in the market for the decline in VIX. But we can do this; if the indices do not make a high-margin movement by then, we can closely follow whether the funds switch to long in the CFTC data to be announced this Friday evening. Moreover, the total position of hedge funds and asset managers has shifted from -14 thousand to +11 thousand, switching from selling to buying in VIX. Be careful!
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