Contango

Sort of like all those do it yourself Gold Mining shows hitting the reality television scene pretty much nailing the near term top in the gold market.

Initially both European stocks and US equity futures were grateful that China has picked at least one asset class to prop up overnight, and rose in an extremely illiquid market with European shares gaining for first time in 4 days, as S&P futures rise even as the MSCI Asia Pacific ex-Japan index just fell to the lowest level in more than 4 years. However, as of moments ago the Stoxx 600 had faded all its earlier gains and was trading near the flatline, as an algo takes out all stops on the top and bottom once more, and looks set to move on to US futures shortly.

It only takes a moment for the observant viewer to ascertain the state of each of these two realities. There is no Schrodinger's Cat in Dennis' world.

"... we fear that prices are soon to head lower… and perhaps materially so. Thus, it is not only wise, it is reasonable, that we shall increase the size of our derivatives positions to make quite certain that our net long position is covered completely and that we are indeed as “net neutral” as we can possibly be.... ... we do find ourselves quietly… very, very quietly… turning away from being manifestly and overtly bearish of crude to being bullish as the term structures continue to shift."

Oil tanker rates soared to the highest in seven years amid an acceleration in the number of bookings and signs that the ships are being delayed when unloading due to a lack of space in on-land storage tanks. This means that day rates for 2 million-barrel carrying ships sailing to Japan from Saudi Arabia, the industry’s benchmark route, surged to $111,359, the highest since July 2008,

Oil storage problems are so severe that traders asking ships to go slow, and that is where we see something very strange occurring off the coast near Galveston, TX.

At $43.96 (for the Dec contract), WTI is trading at its lowest level since August 28th (in the middle of the month-end massacre). The WTI-Brent  spread is at its widest in over 2 weeks "stressing the need for U.S. output to drop to get rid of the oversupply," warns Commerzbank commodity strategist Carsten Fritsch. Even more worrisome (for future hope), is the plunge in prompt contango (1st month - 2nd month) which has collapsed to 5-month lows.

If you’re sophisticated and have a bit of luck, you could end holding your gold exposure at zero or even make a profit.

As WTI Crude tests new lows this morning (Dec contract $45.32) after API reported a huge build, we can't help but wonder "what happens next" in Dow Transports as the exuberant index has decoupled from oil for the 3rd time in a week... the only saving grace for the collapse in oil - Gartman warned "this could get very, very ugly and do so very, very quickly."

Despite its dubious track record, oil prices are stumbling after Goldman Sachs releases a report calling for oil prices to remain lower for even longer, calling for a drop to $50 within the next 6 months.

In a furious race to shore up as much liquidity as possible, Glencore - which a month ago announced a dramatic deleveraging plan - and its peers have been quietly scrambling to raise billions in secured funding. Case in point none other than Glencore's biggest competitor and the largest independent oil trader in the world, Swiss-based, Dutch-owned Vitol Group, whose Swiss unit Vitol SA earlier today raised a record $8 billion in loans.

Forget China, Volkswagen, Glencore, Noble, and pretty much everything else. The only catalyst that matters for today's price action has just been revealed. Earlier today, Dennis Gartman, whose flop-flip-flop-flipping calls on stocks, commodities and everything else have become a blur, just went mega bearish, and is predicting that the S&P has some 400 points of imminent downside.

Don't trade yesterday’s news. There was backwardation. However, it's a sensitive indicator and you need an updated picture before buying after a sizeable price move.