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Kevin Davitt

Kevin Davitt

Kevin brings his unique experience in derivatives to RCM Asset Management. Following graduation (Marquette University – Evans Scholar 1999) Kevin started working for LETCO Trading…

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The Last Time Crude (WTI) was Here...

The last time WTI (Dec Crude Oil) was here, and by here I mean $86.50 was July 2nd on it's way up to $100.

ON JULY 2nd, 2012:

Dec Brent Crude closed $96.60 on it's way up to $117. BZ is 108.50 today.
So....in July the spread (BZ v. CL) was $10 wide. Now it's $21.50 wide.

Dec RBOB closed 233 on it's way up to 299. RB is 262 today or 13% higher than 7/2
Dec S&Ps closed 1350 on it's way up to 1468. ESZ12 is 1414 today or 4.7% higher than 7/2
Dec Gold closed 1602 on it's way up to $1799. GCZ12 is $1712 today or 6.9% higher than 7/2
Dec Silver closed 27.58 on it's way up to $35.50. SIZ12 is $32 today or 16.4% higher than 7/2
Dec Copper closed 347.80 on it's way up to $385. HGZ12 is $357 today or 2.5% higher than 7/2

Dec Dollar Index closed 82.36 on it's way down to 78. DXZ12 is 80 today or 2.8% lower than 7/2
Dec Euro closed 126 on it's way up to 131.50. ECZ12 is 130 today or 3.2% higher than 7/2

The Cash VIX closed 16.80 on it's way down to 13.30. The Cash VIX closed 18.85 yesterday or 12.2% higher than 7/2

My conclusion would be either WTI crude is too cheap or just about all other risk markets are too expensive. In my mind, if you don't believe the global economy is coming off the rails (and that's a BIG IF), then WTI Crude may present the best intermediate term opportunity (2-3 months). It looks like a relative value.

Perhaps things are coming unglued and Crude is our harbinger. In which case, we could be in for some "baby out with the bathwater" type trade.

I don't believe that situation is upon us just yet. We have (less than) Super Mario Draghi in Germany today. We had a middling Chinese Flash PMI number last night and a concerning German PMI release.

FOMC "decision" at 1:15 pm Chicago time today. I would anticipate they maintain their firm commitment to extraordinarily easy monetary policy in the face of global economic headwinds and persistently high domestic unemployment.

By. Kevin Davitt, Global Execution and Futures/Options Broker




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