On the back of falling rig counts and a technical oversold bounce oil has staged a vigorous two-week rally, climbing 22% off its 5 year lows of $43.58 on January 28. Bears are calling for a continued downtrend with this recent move being only a dead-cat bounce, whereas bulls find encouragement in the price holding above $50 for the first time in weeks. Personally I would enjoy an extended period of cheaper gas as prices at the pump have jumped correspondingly in the last couple of weeks, and it would also give me the opportunity to pick up some beaten down oil majors paying fat dividends, like CVX, TOT, or the XLE ETF. Junior oils have also staged a breathtaking surge in plays like OAS and GDP, as well the XOP ETF. Another interesting ticker to watch is FCG , tracking oil & gas producers and explorers (holdings here) and its 3x leveraged cousin GASL, which have bounced sharply after hitting all-time lows recently. The energy sector has lifted broader indices in US markets, and has also thrown a lifeline to the ailing Russian market as shown by the strength in RSX, RUSL. A strengthening ruble has also helped. DWTI and UWTI are still trending and in play with this oil volatility still at the forefront.
As always, trade well and stay disciplined!
PCLN hit a milestone today, although a bearish one, as it plunged through the $1,000 level for the first time since October 2013. January 1000 monthly put options expiring on the 17th (technically tomorrow) skyrocketed from a low of $0.55 to a high of $10.60 before closing at $8.70, representing a 625% return overnight! Many other momentum names have fallen through key levels this week, including AMZN, AAPL, BABA, GPRO, NFLX, and TSLA.
Even ‘Turnaround Tuesday’ could not save the broader indices as an initial rally was quickly sold off, with the S&P 500 down again today for the fifth straight day, closing 52 points lower since last Friday at 1,992. The 30-year yield has also been cratering all week as evidenced by fresh highs in TLT. And the VIX has been hovering above the 20 level for the 3rd day in a row.
There were a couple of monster moves in commodities, notably natural gas, which surged almost 10% yesterday after already being up 5% the previous day off year lows. After this morning’s EIA inventory report it continued to rally briefly before giving back some of the week’s gains. The other big gainer was gold, up over $30 this morning as it breached the $1,250 level, reaching a high of $1,267 before settling just below $1,260. The catalyst for this appeared to be the Swiss National Bank’s decision to unpeg the Swiss Franc from the Euro, causing the franc to jump 30% vs. the Euro and 25% vs. the USD before paring some gains. FXF would be the ETF vehicle to trade this if you are so inclined. And of course, what week would be complete without volatility in oil? WTI crude rallied briefly above $51 before settling sharply lower at $46 today. For the strong of stomach DWTI has been an excellent ‘buy the dip’ tool to ‘sell the rip’ off any spikes in the commodity at this point, hitting a low of $144.81 this morning before closing near the HOD of $174.55.
With monthly options expiration tomorrow expect another volatile day as Goldman Sachs caps off a week of financials reporting disappointing results with BAC, C, JPM and WFC having all taken a beating. As always, trade well and stay disciplined!