Oil, CAD, stocks, etc.

Real world not seeing much of a shock yet

The discrepancy between expert predictions of a massive supply shock from fertilizer, oil, helium, and other products and the reality on the ground (everything still seems to be working okay despite some idiosyncratic fuel rationing in Asia) is becoming harder to reconcile as we enter Week 7 of the war. As the fear factor recedes and worst-case scenarios fail to materialize so far, equities can’t stay down.

Note too that last week we broke the pattern of up early in the week and sell off hard into the weekend.

Cyan bars show last week. As noted yesterday, the market is in What the Fudge mode here as all the bad stuff that was supposed to come down the pipe has not. Gas stations in Australia are still open. Chip fabs are not shutting down for want of helium. Corn prices are not going up, they’re going down.

Again, it’s very hard to square the forecasts of supply shock with the current reality of a global economy that appears to be functioning.

My WTF indicator hit the mainstream yesterday, which is fun. Should I tell him what the F actually stands for?

Bears are sticking with the idea that this is like COVID where the reality was clearly bad for a bit, but markets ignored it until they could not ignore it any longer. I guess we will see, but the path of least resistance remains higher stocks, lower USD and H4L oil prices. Nothing good is happening out in the real world, but it’s stopped getting worse and markets are bored of the Iran story and gorging on AI again. SNDK, CRWV, and all the AI Capex names are ripping again and even software has rallied as value hunters see a juicy margin of safety after the huge selloff.

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USDCAD update

Last week I wrote about how higher-for-longer (H4L) crude and OK stock market performance should be bearish USDCAD (see here: https://www.spectramarkets.com/amfx/ifclh4l/). This has played out so far as the USD falls across the board with the PBoC doing its part with friendly fixes and vol dropping across all asset classes. Last night, Mark Carney clinched a majority in the Canadian House of Commons after three special elections, and that is probably a mild CAD positive. It’s marginal, but helpful.

If you are short USDCAD, here is the chart and some important areas. You can see we did a false break of 1.3925 before crumpling back down as the war frenzy cooled. The pre-war range (FEB/MAR) was 1.3500/1.3750 and so right here (1.3750) is the first major level as old resistance becomes support. The bigger buy zone is 1.3670/1.3690 because that is where we have the 23MAR spike low (marked on chart) and the 1% deviation from the 100-hour moving average (calculated in bottom right corner of the chart as 1.3691). You can see from the bottom panel that USDCAD tends to stabilize or mean revert once it moves more than 1% from the 100-hour. The most ambitious short-term target is 1.3600. That’s where the trendline comes in off the three 2026 lows. Then, full symmetry takes you to 1.3520 but that’s going to take a few weeks.

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Oil

If the supply disruption bears are correct, oil should eventually make a new cycle high. So far, it continues to follow the 2022 script: Massive spike, then long consolidation without ever taking out that big Sunday gap high. Here are the two moves in Brent crude, rebased to 1.0 on the low pre-war.

And so you can see the triangle more clearly, here’s Brent crude.

If the current market complacency is wrong, Brent crude should take out $120 at some point. Right now, there doesn’t seem to be any strong reason to believe this is imminent.

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Final Thoughts

1. In their annual report, a company called “SharonAI” said NVDA was a shareholder. Then they said, oh whoops, no they are not. Bloomberg headline: SharonAI Holdings Corrects Form 10-K Regarding Nvidia Shareholder Status; Says Nvidia Is Not A Strategic Shareholder And Holds no equity in SharonAI. This seems funny to me. Not sure why.
2. CAR omg. We are doing this again? Look at the chart of CAR (Avis).

Have a monosyllabic day.

Map of the United States colored by number of syllables in the name of the state or district

Maine is the only monosyllabic state

California could be 4 or 5
Pennsylvania could be 4 or 5

Many states end in -ia because in Latin, the suffix “-ia” means “land of” or “place of”.

Virginia: Land of Queen Elizabeth I, the virgin queen
Pennsylvania: Penn (William Penn’s dad’s name) + woods (sylva) + ia
Indiana: Land of the Indians but Indiania is just hard to say so they simplified it

Louisiana is a French root. Louisiane… The land of Louis XIV, kinda thing.

Etc.

good luck ⇅ be nimble