264947322 - 1_luj7d21s - PID 1851201 Good afternoon everyone and welcome to the real vision daily briefing. I'm the Senior Editor at real vision and I'm sending to you live from Copenhagen, Denmark on the 12th of July. We are standing at crossroads in, in energy markets with extremely important support levels coming up just south of current spot levels in, for example, the oil market. And I think no one's better at unpacking the price action in namely the energy market than my guest for the hour, Sony career, the editor of the morning navigator tool. It's great to have you back on the show Hawaii. I'm great. I'm curious, are you doing good? Good. Tony. I mean, let's start by unpacking today's price action across assets. We've seen another big sell-off in the oil price alongside we'd commodities in general, but also a very strong US dollar in forex foreign exchange. What do you make the price action? Yeah, It feels to me Andreas, like the strong dollar tagging the Euro toward par, you know, is really weighing on, first of all, base metals complex, which is then weighing on the rest of the commodity complex. As markets now go from pricing in, you know, inflation to stagflation to recession. And I'd almost argue that we're pricing in a depression in a couple of spaces, in the commodity space. But what we're seeing today is we've seen a big pullback in that grade rotation where we're looking for natural resources to rally over technology. And we're seeing just to sort of little shaded that today while they're getting to the commodity space with kind of two sigma flops all over the place. There's two sigma pull backs and palladium corn, Brent crude oil, WTI soybeans, the Bloomberg commodities index. Today. To me that's the whole world positioning for recession, right? And it feels to me like it and it agrees with the vibe that I got over the weekend where everything I was consuming over the weekend was like there's a recession coming. Right? It was pretty much getting baked into the media, baked in as fact. And it may very well be the fact. And then I think it feels like portfolio managers came in Monday morning and said, Okay, you know what price the boat for you to pivot the book to recession. And let's just get it on the tape. So in the first two days of this week, we've got two huge tick extremes on the downside and the egg. Let's write a prince over 1500 on the negative side, like 5800 yesterday, 7800 something today. So they're definitely wailing away at markets. And I'm really intrigued by this pullback and WTI, that seems like a lot of short selling, right? We've proven the commitment a trader shows, the managed futures report showed that there's not a lot of length than WTI futures. They show that there is a massive short rather an equity futures. So I've got a little mental bulls-eye on that position right now. And today they also managed to get to somewhat technology which as we know, it has been under pressure with the Twitter deal falling, et cetera. And I believe that I don't want to go into much detail there, but it obviously gave tech a black eye on Monday morning. And we've seen a little bit of follow through with two sigma fall backs in Microsoft, the software sector and cybersecurity today. So if they're getting to everything today or almost everything, they've got the S and P pulled back to around 3800. We're somewhere now, you know, in this range between the moving averages and the recent low. So definitely in danger, but it feels like a lot of for selling and a lot of late selling down here. So if I could add just one thing, Andreas, you know, standing up on the day are sectors that have already been washed out. And airlines are up 4%. They've already been washed out. Cannabis is 4%. God knows that sector has already been washed out. But I get encouraged because home builders are up on the day to day a day where we've got interest rates pinned to the highs probably ahead of CPI tomorrow. And we've got metals and mining of all sectors of 60 basis points on the day with the two Sigmas, slide and copper. So that just tells me that those metal stocks are there into huge technical support. It tells me that the stocks may be washed out and already priced for that recession. And so we're just going to weigh out this week how much more there is to go. There's some data coming up an oil at the end of the week, we've got CPI tomorrow. So this, these first two days have just been the opening salvo of the week for me, if that's fair undress. Yeah. It's quite a tricky market these days, to be honest. But I wanted to ask you, told me about the oil price Because I mean, oil is down 8% 1 day than 5% the day after, and then down, say 8% again. Today. What are your thoughts and on this market volatility? And what would it take for you not to buy the DEP? Good question, very, very well posed question. So I think that a lot of the volatility is shorter if you know that the market, the oil market didn't stop anywhere, that made sense just yet, right on the downside. So. We've kind of did this retrace mitt up to moving average resistance and came in after a weekend when everybody is like, Oh, we're going to do the depression thing this week. So they go ahead and put pressure on oil again. It feels to me like they are massive shorts just piling on and adding at bed prices into support here. As you know, we have the 200 day moving average below at 95 and a quarter. And I have to say the only thing Andreas that would get me to not buy the dip is a pivot in our bad ****, crazy policy stance toward energy. Because I'm still seeing unbelievable, unbelievable propaganda and misdirection on television. Short clip today where Mark Haines is asking someone in Biden's Energy Department if there would ever be any give on any of their policy in terms of drilling on public lands, starting up pipeline operations to try to provide some relief for the gasoline price. And the gentleman in the Biden Energy Department came out and said, Well, this is this is all false narrative of the oil companies are drilling on the leases that they have. So they're really just squeezing the market for profits right now. So as long as the administration continues to tell this lie about what's affecting oil prices and throwing shade from the direction that it has a lot to do with the, the present state of inflation and the pivot to green energy and ESG, et cetera. To stay in line with the world economic foundation principles. And it seems like people are really forcing it on the downside here. Then my most interesting tell today and the oil market is with a $10 slide in the last two days. And crude oil, the front month diesel spread has expanded by 30 percent. So normally, and I'm sure you've seen this before, Andreas, when we have serious sell offs in the crude oil market, structure always goes with it, Right? The calendar always gives way when front month backs off this much. And in WTI crude oil we've seen a pullback in front month spreads, but we're still wildly elevated levels. We're talking about 2.5, $3 per month we spread, which is insanely backward dated. And we're talking about diesel fuel where we know we've got a shortage of refined products, where the spread is actually widening as the price is going down, reflecting the title missing that markets. So that to me is one of the tells that the oil markets showing me that saying, you know, don't, don't really get too excited about selling this dip into the 200 day moving average rather, rather be prepared. And I'm not going to say that I'm going to stand there and own crude oil at the 200 day. But I'm going to definitely shop around for some energy-related assets that are on their back In the last couple of weeks looking to buy them cheap and looking for them to make higher lows. Because with the dynamic that I'm seeing now is that everything technology is crawling over, curling over toward its old low infirm bear market territory and everything in the Natural Gas, excuse me, natural resources space has pulled back into massive support in secular uptrend. So those are the trades that I'm hunting right now. Address. Yeah. Makes a lot of sense, Tony. But can I ask you to try and explain this divergence between the these'll spread and the development in crude oil. Could it be linked to a strong dollar? What's your explanation? Goodness, I'm sorry. Could it be, could it be linked to a strong US dollar? Or what's the explanation? I think you can link the weakness in the WTI, in the oil market spot price to weaken the dollar strength because certainly a euro losses and sell off of this magnitude to this important of a psychological level, right? 1 double O, get through there and, you know, all bets are off on what could happen, right? There could be a much steeper base metal slide. There could be a steeper commodity slide along with it. I'm prepared to trade out of that dip, really with the best risk reward principles and tactics that I can. Because I still think that it's a fat pitch given where spreads are and how tight the calendar is, and how much of a shortage we have in diesel spreads. And if you notice, by the way, gasoline at the pump, hasn't it? No move yet, no change so far. So really where the rubber hits the road, where it matters, where the consumer hits the gas station, he's not getting any relief. So the price of oil back from 130 to 95 is nice, hasn't changed anything in the gasoline market. I supposed that we should expect another high print in the inflation report tomorrow given what you just stated on the gasoline price, Tony, I tell yeah, I don't see how it comes out any other way, Andreas and I'm also keyed up on the fact that I tweeted it out good For a like a 12 investment banks on the street, their research department, or two ticks apart. On the CPI expectation, their range is literally I think 8.6 to 8.8. And all 12 banks are right in line with consensus. That tells me that there's a higher probability that we see an out of consensus number. I would not be shocked at an upside, surprised with gasoline prices so much higher for so much longer, right? I don't know where the relief would have come from if we were to see a pullback and CPI on, on this particular months reading, because the pullback in the commodities index certainly isn't going to filter out to finished products by the next month reading or even in the next month. So I'm still expecting that to be an elevated number. I can totally see the way the bond market has been trading. I'm along some treasuries now and wildly uncomfortable even though I'm only a couple percent out of the money. And I'm only uncomfortable because the Bryce actions still stinks right there down 20 percent on the year and there is no respire, right? Look at 2-year yields or pin great to 310 again, I feel like they're waiting to see a 10 percent CPI number of bond. This location lower, higher yields. And then the last gas blower in the stock and commodity markets. And then we'll be able to see maybe some red to green days from there you go. Excuse me. Three days from now. That's right. Sir. I wanted to play a sound bite for you in relation to the debate on the important support levels in the crude oil price. It's from a discussion between old pal and Julian Britain in the inside of talks for July 2022. So let's have a listen to that sound bite and get back to the discussion on the oil price to my favorites. For me, the other thing to leave pizza place is watch this $95 level in oil. I think if that breaks, there was a big flush to come. You can see how passionate people are about oil positions. I know a lot of people got me. Just be very careful. And if that behavior be very careful in anything. Because if finally we are getting into the quickening where everything just really couldn't. Quickening is the right side. That's absolutely right. Even if it's not pouring down the funnel like that. You don't need to be a hero in this environment. The inside of talks will be available for our pro tiers subscribers at the real mission platform from today back to you, Tony lapel points to this 95 level as an amazingly important support level in the oil price. Do you concur with that? I do. I do. And I see that I think I've got the 200 they just above there and 9520 give or take, right. We're going to trade through the wells by by a few pennies or a few nickels and dimes. That's not, you know, the big picture is what matters in and if there is that quickening that Julian and Rao are maybe talking about, maybe anticipating a little bit. I certainly don't like to fade centuries worth of macro trading experience right there. So when those guys are on guard, I'm on guard. And they're very much right where, you know, in terms of tactical training and asset performance, I wrote the other day that the longer your money is treated poorly, the better the chance that it's going to go really wrong from there. You know? And, and that's just the feeling that I get with some trades that I put on in some investments that I've made. And you get the feeling of how they go by the price action and that to speak to what Raul and Julian are talking about. You know, we, we are at that sort of de-risking phase in the markets where nobody would be shocked if somebody blew up this week, right? And we came in tomorrow and all of a sudden it was, Whoa, there's another $5 in oil, whoa, there's another 100 S and P points, right? So these are the markets that, you know, you have to be sitting on the edge of your seat for at all times, managing your risk and making sure you've got it backed up against some sort of a logical support line. So I do agree with Rao. I agree with Julian that men it is definitely look in dangerous out there. I'm going to stand in and go ahead and try to trade out of this opportunity that the natural natural resource space is presenting me. Yeah. You mentioned earlier that the risk of recession could be a driver of the price action that we see commodity space. And in relation to that particular debate, we had fresh numbers out of the, if I be surveyed early it's a day. So expectations among small companies in the US hitting an all-time low. What do you make of the risk of a recession when you see numbers like that total feels like to me it just coincides with the President's approval rate falling. I'm I'm I'm just looking at it from the energy side really and try not to get too geopolitical here. But you know, this, the, the Bayesian near the American citizen is dealing with all this inflation. They're getting, why is this to what's been causing it, right? They can go and dig into any financial publication and start understanding that the Fed, easing the Fed's balance sheet, all these things over the years have contributed to the inflation that we're seeing now. And I think that the misdirection that comes out of the government and the media, while there are. Protests going on around the world and a complete collapse in Sri Lanka. I think that that sort of detracts from their credibility. And I think that that obviously has an effect on the small business owner and the consumer, right? They, they're the sort of tip of the spear of the economy and they're going to feel every bit of crunch and every percentage point that's not measured by CPI. And so that's where a lot of the bite of this inflation is. And with you with, I feel like the constant misdirection and blame being cast outside of the White House and outside of us. I don't see how that gives you confidence to run a business here. No. Who would agree its own? By the way, the White House said today that they fall, see a very high inflation report coming out tomorrow. They obviously know the number already, but they also tried to pitch the story that the numbers up already outdated soup, we get this very elevated number tomorrow. How do you think markets will react to it? Well, if I add and make a guess, Andreas, I still think, like I said before, I'd love to see, I love to see the volatility of bombed-out CPI number like a 10 or 11 percent. You know, just, just to really shake the market's up and say, Okay, if we're going into a recession and we've got 10 percent inflation. What does that mean for commodities? Does that mean commodities are likely to back off from here or does that mean that commodities are likely to hold their ground? I don't know, but I would bet on the commodities are telling the story of the inflation and I would like to buy the dip. You know, that's kind of how I'm looking at it. I don't think that we're in the ninth inning or anything like that of where PPI or CPI is going to on the upside, I don't think we're in the last thinning of seeing the highs in gasoline prices just yet. So with all of that left to play out with Biden head into the Middle East this week. I think that the oil market might be perceiving that he's going to come away with a victory that I don't think he's going to come away with. So that to me is even probably encouraging more selling into this hole and given me more confidence that the Tailwind is still to the upside when when diesel spreads are blowing out right into a nosedive in the WTI market. Yeah, that is a really interesting observation. If we look at risk assets over equity is given a high inflation print tomorrow, a firm Federal Reserve. When it comes to the interest rate policy, what do you make of the overall price action than S and P 500 in relation to that, they get a cracker hard man, right? Yeah. I sent over that chart today where the SPX is pulled back to roughly the 38% 50 to retrace Min. And I don't I don't look for those levels to really I just look for those levels as a guide to the damage of certain moves, not as necessarily a level that I'm going to go in and buy. You know, if I saw it back off to that Fibonacci level that was also lined up with the trend line and a moving average, I'd get a little bit more excited. But all we are as we fall and we've given back 38% of the lockdown rally hold in and around here. But I'm going to tell you if we do come out with a worse inflation number, I would imagine that we're going to see another day or two of selling in, in the S and P. A lot of selling in technology possibly predating higher yields. And I would not be optimistic about the clothes on Friday. We get, if we get worse than expected CPI and or PPI data. So this, this slide to me still seems like it's in motion in the S and P. I'm just a little more willing to take a stab at some of the natural resources areas on a weakness. It That's fair. Yeah. It was obviously one of the highlights of the day when the euro versus the dollar touched parity for the first time in quite awhile. And I personally think that one of the drivers is the massive divergence between the pricing of natural gas in Europe and in the US. You mentioned that exact divergence last week at the daily briefing and I brought a shot with me today showing this divergence. What do you make of this sprint? First of all, I mean, is it, is it a driver of, of, of the foreign exchange rate? And is it something that could continue that spoons gas spread? Yeah. Right. The Austria this I blind close for maintenance. Jump to Vladimir whether he opens it up or not again, on the other side of the maintenance, europeans had been told that they should prepare at some point for a total shut off of Russian gas. You don't. I mean, I think that that is exactly why the euro is gone into Islam Bay mode right now and it literally can't find a bid. I think that you're probably seeing massive effects shorts into the euro. As an FX trader, you're always, you always want to be short for the break of that psychological level. You know, you don't you don't necessarily want to be the one hitting the 99.99 bid. But you do want to sort of be position short for the slide through that big technical level. And also sets us up for an exhaustion move in the Euro. Re-address the world is bearish. The dollar bid. The dollar bid stories on the front page of the journal. If we come out tomorrow morning and have another relocation lower and the euro, maybe there's a chance it trades off from par. And I only say that because if the portfolio managers in the equity markets are clearly positioning themselves for a recession, I would imagine that the FX traders are clearly positioning themselves for a continuation of this Euro weakness in dollar strength. So a lot of times what you see is the market will get max short into that psychological level. And then there could be a retrenchment rally just out of the positioning. So there's a lot of volatility that we're going to be surfing this week, but I'm ready for yeah. I don't think we can go much lower than 0.98. Seems like a very important technical level. Just a bit below current spot levels in Eurodollar, I wanted to show another chart in relation to this discussion on natural gas and the link to the, to the Eurozone. Because essentially the correlation between natural gas prices in Europe and the price of electricity is almost one-to-one. If we look at it over the past 12 to 18 months. And I guess that is the clearest risk for the German economy, for the French economy, et cetera, the big economies in Europe that we will be faced with extremely high electricity prices throughout the Ottoman into the Winder, making it very tough to actually manufacture stuff in Europe. I guess offshoring will, will be back on the table in Europe if this continues. I wanted to pick your brain on the sort of relationship between Eurodollar and commodities in general. Because if we get a continued strength in the US dollar versus the euro, at least it's typically something that points to weakness in the industrial metal sector. Is it a potential weakness in your bullish oil theory as well? Well, there could be demand destruction to the, to the level 80. We could run into a situation where maybe there's demand destruction to a level that relocates the energy price lower. But as you can see, it will like you just outlined really nicely address the risk is that mother nature doesn't cooperate this winter. Comfort Europe, and they have a stretch of colder than normal temperatures for longer than they've had in the past, right? And that puts more strain on the electric grid probably to the point that they have rolling blackouts because that Dutch TCF price, that's where it is around 170 or so Now, that could go Tenex in the blink of an eye. If they're going to continue to try to source it that way, they're going to run out of they're going to run out of gas and they're going to run out of political will to source base load power with natural gas at that price. So that's why you're seeing these other phenomenon, the markets where thermal coal is trading over coking coal, which is one of the most absurd anomalies that the Green Revolution has produced. Quite ironically, in fact, obviously that they're resorting back to coal now for heat. And we're going to see where it shakes out, but it's really tough for me to gauge the economic side of it. You know, the effects to me, I try not to make predictions, but use that as my barometer. And so I'm, I'm really just Sidney Going out, Andrea, seen how it reacts around par. If there's follow-through from there, I'll probably be a little bit more concerned for my commodity position. I have just added some metals and some energy on this div. And I would imagine if the euro has a large magnitude slide through par, they're certainly going to come after base metals, commodities and oil and grains in that order. Probably. So I would be prepared for some more pain. But I still think that given the physical situation in all of the markets, that this is just a debit to be contended with and and not something that you throw in the towel on, not by a longshot. We have time for a couple of questions from the audience. And Daniel is asking you, Tony, whether this extremely high 321 crack spread that you've mentioned over the past weeks could be seen as a factor contributing to demand destruction rather than being a bullish signal for the oil price. What do you make of that discussion? That's, that's, you know, that's also fair way to see that it could be framed that way, right? Because the administration is trying to pin the energy prices on essentially price gouging by gas stations and refiners. They can then point to the 321 crack spread and say, Hey guys, look what your margin is. Without divulging the fact that the market sets the price for gasoline and not the refinery itself. So as long as we've got situations right now where you can, you can get information into physical markets right now where despite the paper pull back and crude, there have still been huge bids in the physical markets, right? And then like we said, with the spreads blowing out and widening the crack spread now has found the bottom at 40 and rally back to 46. So there's another tail and the energy market that while we've had. During the last 10 percent pull-back, we have seen a 20 percent widening of the crack spread, which is a sign of gasoline demand. There's no other way to put that, that's the market putting a price on gasoline demand. So, you know, it doesn't look like this. Gasoline demand has fallen off a cliff. I generally don't believe that to negative session to negative quarters of GDP generally knocks gasoline consumption off a cliff, rather makes, makes a barely noticeable dent in it like a deck chair off the Titanic. So I'm going to look for the crack spread to migrate back into the 50s in probably short order. Because the refineries are still able to buy oil at any price, especially on 10 percent discount sale now and crack it and refine it and sell it. So to me, the oil and gas market still looks pretty healthy despite the pull back and flat brush, it really does undress. There's also a question on the metals and minors section of the equity market versus the overall equity market. Is that a trait that you consider going long metals and miners versus the S and P 500 for example. I made it up to my eyeballs. Well, Sweet. I've actually added it last week to the view matrix, which is my, my amalgamation of views that I'm treating in the markets. For me having, you know, I'm a big fan of when markets pull back to old highs. We saw me break out and get actually ahead of the oil markets. They were running on the stagflation theme that the market was anticipating. They were running on the transition to electronic vehicles and constant battery power creation. And then all of a sudden, the administration needed gas prices and energy prices lower. So they went silent on the whole transition to net 0 because they know that is generally a bullish energy bullish commodities situation. So seeing as the metals trade was the first to go off on that crazy and embolic run where we had aluminum trading for k and copper at 11 k. It seemed to me that the metals and mining section, which one of the first natural resources sectors to pull backward. So since it pulled back hard and pull back into support and has held its ground while they've been caning metals in the last several days. Those are the things to me that's a maybe the equity markets haven't been washed out in terms of metals and mining. And maybe this is at least where you can find good risk reward because we can. So that's a trade that I'm going to take 10 times out of 10 Andreas and put my stopped below the recent low and let the market gods come and get me. And if the euro goes pounding through one, they'll probably get me. And if it holds here and has a 3, 4, 5, god forbid six handle retrenchment rally. My trade is going to work like a jar. I perfectly agree. I also hold this position in my structural portfolio. And I basically don't want to look at it. I think in ten years from now it would be basically one of the best performing traits that you could, you could enter at this juncture. I've made it my trait by Tony to it's always conclude the daily briefing with me. And given that we had Eurodollar trading at par today, I saw this beam on Twitter referring to the reaction from Americans when they see Eurodollar at Fareed. I'm going to buy the Eiffel Tower. I don't know whether you plan on doing so, Tony, but it was a great pleasure to host you. Once again. It's certainly, it's certainly worth considering a trip to Europe on vacation or something like that. I mean, in any incorporate Nick Cage and the meme and you and you got me from Hello, Andreas does have aged out. At least I had a laugh as well. Really. I think that this was all for for the days daily briefing. We will be back tomorrow with Eric Johnston guessing the show. See you there. Great job, Andres. Thank you.