MBCC TH #19th January'23 - "Why did the market magically turn yesterday right at 4050? What are credit and FX markets telling us and why does this matter for Copper/Coal/Gas and Oil?"

The market has been grinding higher day on day for the past week or so, but then it reversed “magically” yesterday, what gives? Well, our premise is simple, the market is tying to test the resolve of the upper and lower bands and frustrate the bulls and bears. We get to extreme pessimism at the lows and optimism at the high end of the range, which causes FOMO investors to buy and sell aggressively. Everyone is so eager to not “miss the bottom” or get stuck in the wrong position, that no one is actually taking a look at the fundamentals or what is driving stocks/asset classes here. Such whip saw aggressive noise focused/momentum trading is futile especially in a market that is trendless and filled with negative optionality (we discuss this in our note yesterday for a our paid subscribers).

We first talk on the technicals of the market, as technicals is what tells us how far and how much the market can move before it hits a bump. We do not rely on JUST technicals to play the moves, but if we have a view fundamentally trigger by our demand/supply and cross asset macro models, then we will use the technicals to time our entry and exit positions, as they just tell us what the pitfalls are of the algos and momentum chasers. This “chart” trading method worked well for a lot of novice investors who became gurus in 2020/2021, as the market/Fed played to their ego as they pumped market with $ trillions making every bet work and seem easy. But it does not work in a market forced to focus on real fundamentals, balance sheet and economic drivers and especially not flat and trendless markets.

Today we post a series of charts and what our macro models are pin pointing to.

We discuss China and how quickly and how fast their opening can/will impact the Oil market, but we don’t just regurgitate the basic news the media does, we jump into individual product markets and how that impacts Oil. Most do not even look at that, but we see the physical market flows and tell you what WILL happen. It is all linked!

Is 60/40 asset allocation more like 20/20/20/20/20 or 20/20/40/20 or something different? We tell you how to be positioned into this cycle, it is not that straight forward. Keep powder dry and pounce on discrepancies as they appear, monetise, and step back. That is the name of the game this year.