Mean Reversion

Oil Tumbles Below $48 As JPM Warns Of Possible Commodity Liquidations

Any hopes for an early rebound in oil following last week's torrid plunge in WTI and Brent appear to be dashed, at least at the open, when WTI promptly tumbled below $48/barrel. While there have been no materal adverse catalysts over the weekend, three factors are being mentioned by Sunday night trading desks as drivers behind the latest seloff.

The 2nd Commandment Of Trading

"You can always buy it back" is one of the '10 Trading Commandments'. It is meant to encourage good risk management – cutting your losses before they kill you. But it is easier said then done and thanks to some useful academic work now we know why.

Citi's Matt King: "We Think You Should Sell"

"With spreads at post-crisis tights, equities making new highs, and new issues oversubscribed, markets are clearly exuberant. But could it be rational this time? We’re not convinced.... sell we think you should." - Matt King

Key Events In The Coming US

The main focus this week will be on President Trump's speech to Congress and Chair Yellen's speech which is the last before the blackout period. US durable goods, ISM, the BoC rate decision, EZ CPI, UK PMIs and a busy calendar in Australia & Scandinavia also coming up.

Hedge Funds Have Never Been This Long Crude Oil

Despite record gluts in crude and gasoline amid resurgent US crude production, hedge funds boosted their net long position in WTI last week to a new record high.  For the first time ever, hedge funds hold more than a billion barrels of bets that crude oil prices will rally.

Key Events In The Coming Week: All Eyes On Trump's First Actions

The key economic releases this week are durable goods and GDP on Friday. On the political front, the focus will be is on the first actions of the Trump administration including moves on TPP and NAFTA. There are no scheduled Fed speeches this week.