Morning Minutes 11/16/2018

Energy Commodities Reverse Course

November 16, 2018
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

A volatile week for energy commodities continues, but the direction has changed. Earlier in the week, oil was plunging and natural gas was soaring but heading into the weekend, Oil is on the rebound and natural gas has backed off. Oil had become extremely oversold and natural gas had become extremely overbought by mid-week.

The current reversals following a selling climax for oil and a buying climax for natural gas appear to the normal technical corrections. The short squeeze in natural gas has shifted to profit-taking after the news came out that natural gas storage increased by 39 BCF last week, more than had been expected. Indications that OPEC is prepared to defend the oil price with potential supply cuts has eased selling pressure against Texas Tea and encouraged bargain hunting.

Stock markets around the world are trading moderately lower this morning. Dow futures are down 132 points, giving back much of yesterday’s 208-point bounce. European indices are slightly in the red while Asia Pacific markets were mixed between China climbing and Japan falling. With the VIX still hanging around 20, elevated but short of recent spike highs, gold steady and the yen dropping slightly, it feels like stock markets are getting past the worst of the recent panic but are still struggling to regain their footing. Outside events like US-China trade talks and Brexit continue to rise and fall in importance as we work through a tense market environment.

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