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A Mix of Technical Factors Contributed to the Break in Momentum, With More Volatility Possible

Minneapolis, MN | August 29, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC


The down week was not very surprising given the mix of indicators that were followed by weak economic data. This could be a short-term inflection point before macro retakes the wheel.


Three Things

  1. A softer end to the trading week highlights short-term risks - traders can quickly respond to negative surprises.

  2. Despite an increasingly muddied collection of options positions, risk balancing has been a reliable indicator of Brent’s trading range. That options data points to potentially weak support below the recent trading range of $80-$87.50.

  3. A more granular analysis of speculative positions shows Money Managers riding trends, as expected, while quants are comparatively stable, offering possible insights into short-term inflections.


Oil Prices Weren’t Going to Rise Forever


One down week over a two-month period isn’t necessarily the end of the bull run. It is, however, a reminder that prices don’t go on uninterrupted climbs, and when they are on a decent streak, mean reversion can happen fast. This week’s headlines of weak Chinese demand will get the blame for the end-of-week weakness, but there is more nuance to it than that. Market activity had suggested a pullback was likely before the data was released, with technical warning signals flashing after the October future contract failed to hold $87.50. With October Brent options expiring on Friday, we should be prepared for more of that action.



*This summary is based off August 20, 2023


A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


 

Meet the Author!


Phone: +1-832-413-3124


Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.


He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.


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