MBCC Trading Highlights 20th October'22 - Are refining margins rallying because capacity is down or because demand is up? Watch out for Bonds/FX they are collapsing.

The equity market is the least sophisticated of all asset classes, it is too busy being pushed and pulled by algos, retail investors, pension hedging and now long/short traders truing to call the bounce and claim how “cheap” or “overdone” they are here, but truth be told, they are too focused in their little world. The bigger picture is much more important especially in what is happening in Bonds, FX and Credit. They are collapsing and when there is so much pain in those asset classes, it is only a matter of while before that “deleveraging” feeds into Equities. Technicals just tell you where the market can get to, but not where it will actually go. That depends on much bigger flows, but right now everyone is focused on “earnings” and distracted.

It is easy to get lost in the micro, but macro and micro together are important to see the true picture. Also, Commodities are all about “timing”, there is window of too much capacity or too little, the million dollar question is to separate the cyclical from the secular.

We look at diesel/refining margins, what is the status of the strikes? Also why Gold keeps falling, see chart below, despite how everyone is long it. Where can it get to? When is the right time? All this and more in today’s note.