Archives of “April 21, 2020” day

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This is when the world realizes what’s really happening in oil

  
  Analysis
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This is when the world realizes what’s really happening

I’ve been warning for weeks that oil is a negative-yielding asset. If you have it and don’t want it, it’s a big problem to get rid of it.
This is when the world realizes what's really happening
People just couldn’t comprehend how a commodity could go negative. But natural gas went negative last year at some delivery points. Before bond yields went negative people also couldn’t comprehend it. They said it was impossible. Now it’s normal.
Here’s the bottom line: When there is more oil than people can store, you have to pay someone to get rid of it.
Obviously, negative $33.30 per barrel is when someone get stuck and implodes.
There are some massive margin calls ongoing right now. Some funds have imploded and who knows what they might take down with them.
Crude is down 330% today

There is still another shoe to drop in oil

  
Analysis, Crude

It’s all about the ETFs

It’s all about oil ETFs now.
Retail money was flooding into oil ETFs today — particularly USO — on the belief that they were buying oil at $1 or -$10 or whatever the lows were.
They didn’t realize they weren’t buying May oil. They were buying June, which is trading at $21.12.
What’s worrisome is that the USO ETF now owns a large portion of the June contract. Coming into the day it was around 30% but there are signs it could be even more today. The ETF filed today to authorized an increase to shares outstanding to 4 billion. That’s after a surge above 1 billion since March and from 120 million at the start of the year.
It's all about the ETFs
That chart will be updated again tomorrow and we’ll get a better idea.
In all likelihood, retail traders have continued to pile into USO and other oil ETFs. At some point they’re going to throw in the towel or something is going to go wrong at the ETF itself. At one point today it was trading at more than 10% above net asset value.
Funds in trouble
The other thing to watch out for is funds blowing up or even problems at the CME. Oil is traded with high levels of margin. Even though most specs would have moved to June, there were still good flows in May and someone is clearly on the wrong side of that. We need to find out who was holding the bag.

US indices close lower and near session lows

  
Analysis, US Market

Worst day since April 1

The major US stock indices snap day to day winning streak with declines across the board today. The downside was led by the Dow industrial average which fell by -592 points. The NASDAQ index fared the best today but was still lower by -1.03%.
The final numbers are showing:
  • S&P index -51.4 points or -1.79% at 2823.61
  • NASDAQ index -89.41 points or -1.03% at 8560.73
  • Dow -592.05 points or -2.44% at 23650.44.
The shares of Boeing hurt the Dow today.  It fell by -6.63% or $-10.19 to $143.58.  Other losers on the day include:
  • Marriott, -5.27%
  • micron, -5.03%
  • Exxon Mobil, -4.72%
  • General Electric, -4.68%
  • United Airlines holdings, -4.37%
  • Chevron, -4.22%
  • Lockheed Martin, -4.14%
  • Walt Disney, -4.10%
  • American Express, -3.86%
  • Walgreens, -3.8%
  • J.P. Morgan, -3.54%
  • Bank of America, -3.35%
  • Procter & Gamble, -3.29%
  • Travelers, -3.19%

winners today included:

  • Slack, +4.03%
  • Papa John’s, +3.66%
  • Netflix, +3.4%
  • Box, Inc, +3.29%
  • Beyond Meat, +3.22%
  • Charles Schwab, +2.18%
  • Bristol-Myers Squibb, +1.95%
  • Twitter, +1.27%
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