Bullish Trades, Bearish Trends, and a Market That Still Isn’t Buying the Hype

1) USD – Some are suggesting that the US Dollar Index (DXY) is breaking out into new bullish TREND territory.  I disagree… so far.  If the signals change, I’ll change, but right now we still have the USD in neutral territory, but above TRADE.  So a bullish TRADE signal within a bearish TREND signal.  Remember, the TRADE and TREND signals are not single-factor items (like a moving average) but a calculation that is the Rate of Change of Price, Volume, and Volatility with a time series < 1 month (Trade momentum) and > 3 months, respectively.  So bullish TRADE and bearish TREND is saying there’s a chance of a USD TREND change.  But it has not happened yet.  Something else that sticks out is the immediate-term TRADE Correlation between USD and Bitcoin, which just went POSITIVE to +0.56.  The Bitcoin Bottoming Process Signal from December remains very much in motion.  Today’s “reaction” to the Supreme Court’s wording on the tariffs will be interesting. 

2) OIL – Hard truth that no one really likes to hear… because we all use oil!  Sustained oil prices below $50 would severely strain US shale producers, leading to sharp reductions in drilling and output.  You can find this out by listening to earnings calls or looking at the Dallas Fed Energy Survey.  Shale breakeven costs average $60–$70 per barrel, with many new wells requiring $65+ for profitability, making sub-$50 oil uneconomic for most operators.  Oil is still bearish TREND, but a break and hold above $59.98 would change that.  TRADE (momentum) support is now at $55.54/barrel (WTI = West Texas Intermediate).  Probabilities are we chop around in the $50s.

3) VIX – Big day for “The Flows” with about $20B to buy in SPY (S&P 500 proxy) over the course of the next few days by Systematics, CTAs, and the like.  Not surprisingly, into another “big media data” day, Short-Dated Calendar Volatility ramped to 15 (from 8 last week) and implied volatility on the S&P 500 spiked to a freaked out +94% PREMIUM.  That was just 37% one month ago.  What does this mean?  Lots of hedging that suggests Consensus Positioning is nowhere near Bullish Enough.