BOUGHT OIL - Finally! A new trade! Well, I'm not sure how long I'll be holding onto this one, but at least it's a trade. That's the good news. The not so good news is that it isn't FX. Late Monday after I had recorded today's video update, OIL continued to drop and set up what I had flagged as a potential long position. Now I'm not in this one with any big size at the moment, but with the market severely overextended intraday and dropping back into the 100-Day SMA, I thought it would definitely be worth the shot. So what was behind the move?
THE DRIVERS - It could have been driven off any number of factors really. But given that we didn't see all that much volatility in the rest of the market, the move was probably driven off more OIL specific fundamentals. Talk around the rooms I'm in contact with had the drop attributed to higher crude inventories and doubts over OPEC production cuts. In any event, I'm not looking to marry this trade and am just happy to be trading something new.
NON-EVENT RISK - As far as FX goes, it all feels like it could start moving fast at any moment but everything is just waiting for that push to get things going. It's true, we get a number of central bank decisions this week, two of them today in the form of the BOJ and RBA. But ultimately, all of this event risk would probably be better classified as 'non-event risk' given that when it comes down to it, the market is thinking about the next Fed move and that move isn't going to come this week. So the BOJ, RBA and BOE won't ruffle any feathers and neither will the Fed this week. So what will do it?
ONE LEVEL - Well, if you're thinking Friday's NFPs, I would say wrong again. Here as well, it isn't likely that one employment report will derail December hike prospects at this point. So for me, it just comes down to one level and that level is the September base in the SPX500. If that low is taken out, I believe it will send shockwaves through the market and open the door for an intense period of broad based volatility. We are only a stone's throw away from taking out that level, but right now it feels like the stones are being thrown by one celled organisms! Anyway, let's see.