Volatility (VIX) Continues To Be Important

1.) OIL – As of the latest report (4/3/26), the US has oil…and probably a lot more than many think. US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) stood at 464.7 million barrels. That puts US crude oil inventories at about +2% above the five-year average for this time of year. Do others want our oil? Based on tanker reports…yes! As of this report, more than 100 empty crude tanker ships were headed to the US to be filled up. Yet oil prices continue to feel the pressure of an April top. WTI is trading at $91.37, down -1% so far this morning. Could we bounce to another lower high? Sure. I’d expect it after the recent sell-off. But that $100 level is likely reasonable resistance. Given all of the “noise” from the Iran war, it’s important to remember how oil prices have reacted in previous “crises.” Oil prices in real and nominal terms are massively below previous crisis levels. Oh, but what about the blockade?! The Wall Street Journal is reporting that more than 20 commercial ships have passed through the Strait of Hormuz in the past 24 hours, according to two U.S. officials. Ships that aren't visiting Iran's ports aren't subject to the blockade and are being allowed to transit freely.

2.) MATERIALS – I often discuss the importance of positioning, and importantly, when that positioning as a group is looking “offside.” Currently, that might be showing up in the Materials sector, as positioning there is at the 0 percentile compared to 2009. That sector is still about 4% below its former highs, whereas many other sectors have already hit new highs. Perhaps it's time for this group to “catch up” now that positioning is a tad offside.

3.) VIX – On March 9th, I wrote that “I think this week could very likely mark the peak of Iran-related fears. By next week, it would not be a surprise to see things begin to calm down. I say this not as an opinion, but as an observation of the current conditions. VIX spiking to 30 is likely to be an important opportunity.” Remember, markets don’t wait for a “final resolution” to issues/conflicts, etc., before making a move. Could VIX give us a bit of a bounce now? Sure, it's fallen from that 35 spike on the 9th to 17.60 now. If it does bounce, 20 is a decent level of resistance. What does that say regarding markets over the next week/month? Exactly what the flows are saying that I wrote about yesterday.