WTI threatens further squeeze
Markets are in a retracement phase. The overwhelming fears about the global economy are proving misplaced.
Yes, some commodity exporters (especially emerging market commodity exporters) are struggling this year but cheap imports are helping the US, China and many others. It's not going to be a great year for global growth but it won't be the kind of year that crushes risk assets.
So what to do in a risk reversal? Bet on a squeeze in the most-crowded trades.
One of them is oil shorts. The fundamentals of massive oversupply haven't changed but that doesn't mean crude can't retrace to $38.50. That's a important zone of resistance that includes the January high and the 50% retracement of the decline since October.
The first level to get through is the late-January high of $34.82 but it could be a quick, harsh squeeze from there.
It will be enough to suck in all the bottom pickers in oil. Later in the year, they'll get slaughtered.
