Daily plan 7/25
Balanced precision
Hello traders,
Today we had a picture perfect balance day with excesses mean reverting quickly on both ES and NQ.
Crude oil has rallied today and it comes as no surprise. As mentioned in the weekly plan of last month
As we evaluate the dynamics of the oil market, we're observing a notable shift in the status quo. Today, we experienced a hefty 2% increase in oil prices, nudging these benchmarks towards a nearly three-month zenith. The contributing factors for this ascension are multifaceted, encompassing a straitened supply chain, burgeoning US petrol demand, promising expectations surrounding Chinese fiscal stimuli, and a sophisticated cohort of investors engaging in technical buying.
Diving into the specifics, Brent futures experienced an uplift of $1.67, culminating in an incremental gain of 2.1%, thereby settling at a noteworthy $82.74 per barrel. In parallel, US West Texas Intermediate crude mirrored this upward trajectory with a similar increase, culminating at $78.74. These data points are of substantial relevance as they denote the most prominent closing figures for Brent and WTI since late April.
Bob Yawger, the respected director of energy futures at Mizuho Bank, elucidates this phenomenon: any breakthrough past the 200-day moving average ordinarily arrests the trajectory of speculative short-selling while concurrently attracting a wave of traders seeking to capitalize on new market entry points
( I don’t really agree with him but ok).
The sustained upward trend observed in these crude benchmarks over the preceding four-week period can be predominantly attributed to anticipated supply constrictions. This constraint is a direct outcome of production curtailments instituted by the Organization of the Petroleum Exporting Countries(OPEC) and its synergistic group of allies, notably including Russia.
Aligning with the principle of supply and demand, the positive trajectory in oil prices is inherently linked to tightened market conditions primarily incited by Saudi oil output cuts. Furthermore, the annual summer surge in demand for petrol and jet fuel is adding to the momentum as shown by 4th of July weekend flight activity.
A consequential derivative of this increased demand coupled with apprehensions around supply limitations has catalyzed a surge in US petrol futures to an highs not encountered since October of last year.
This upswing in the crude oil market is particularly riveting, as it is transpiring within a broader context of an unfavorable global economic panorama. Europe is grappling with economic debility, the US is on a trajectory of deceleration, and there's a dearth of indicators pointing towards any substantial fiscal stimuli declarations in China.
Moreover, the available economic intelligence suggests a significant contraction in business activity within the Eurozone as shown by today’s PMI, as well as a marked slowdown on American shores. Service sector industries are experiencing the most substantial downturn, and factory outputs are plummeting to the lowest level since the genesis of the COVID-19 pandemic.
Amidst this unfolding drama, financial markets are making anticipatory moves by pricing in quarter-point increases from the Federal Reserve and the European Central Bank this week. The ensuing narrative will likely pivot to the prophetic statements from Fed chair Jerome Powell and ECB president Christine Lagarde regarding potential future interest rate adjustments. While a majority of economists envisage a culmination to the prevailing US tightening cycle in the wake of signals suggesting disinflation, it's crucial not to underestimate the repercussions of escalated interest rates on the global oil demand.
Nonetheless, the world's second-largest economy and oil consumer, China, is demonstrating signs of steadfast resilience. The nation's leaders are asserting their commitment to support their economy in the challenging post-Covid recovery period, primarily by driving domestic demand and signaling increased fiscal stimulus. The analysts at Deutsche Bank have expressed their optimism in this context, stating that China's oil demand "is now surpassing expectations", instilling confidence in China's potential to drive as much as two-thirds of the global oil demand growth for the year.
”Bruh Algo I don’t want to read all this, where to next?”
According to my crystal ball (which basically compressed sand which can do math), we should see definite resistance at 79.98 and then another wave of sellers at 80.65.
Moving on, recapping todays trades:
I had quite an amazing Afghani lunch so I ended up taking a nap in the afternoon so missed the 92.5 short. But overall a good day.
So, what do we expect tomorrow?