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    Volatility Reports 4/10/23

    April 8, 2023

April 8, 2023

Volatility Reports 4/10/23

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U.S. oil ‘mini majors’ emerge from shale patch deals, soaring energy prices

Well, what the bulls got were employment numbers (looking back) that are inflations and an energy market that has the bears trapped and the Biden Administration.

The featured chart of Crude oil through a proxy of the Crude oil ETF, the United States Oil ETF, reveals the trap at point [B], which marks the end of a correction from the spring and summer COTs points [A] and (B).  The correction overshot a 38% retracement by only 2 points.

The low pivot happened on clear panic selling with all three indicators reaching rule#1 extremes. The recovery moved the market back above its longer-term moving averages on a higher gap that has held over four days. All of that is bullish of course.

The leading chart also shows the low pivot happened at the beginning of a new three-year cycle. As you already know cycles are not fixed but have a variance at their change dates, which I show some of on the chart with one of its sub-cycles clustering with it on 3/23/23. The cycle has bullish implications in that it should not peak in the first 2/3 of the cycle. In fact, bullish cycles tend to peak in the last 10%.

Short-term holding the gap and pushing higher this week helps cement the bullish case. Crude already closed above its high close one year ago, a bullish clue. The breakout happened on panic buying, and short cover. Nevertheless TE#1 leads to sideways action as we have seen over the last four days. With the daily bar now reading rule#3 any advance from here is low volatility but persistent until the background can recycle…

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The Back Story Higher Petro = more Rate Hikes

The new theme for 2023 is Oil Giants buying what they see as their future. 

A “Seismic Deal”: Exxon Planning Acquisition of Shale Giant Pioneer

In a deal that would be transformational for the US energy sector, and spark another shale revolution, the WSJ reports that US supermajor, the largest US energy E&P and formerly the world’s largest company by market cap, Exxon – the company that according to the Big Guy made more money than God in 2021, has held preliminary talks with shale giant Pioneer Natural Resources about a possible acquisition of the U.S. fracking giant, as the oil major hunts for a blockbuster deal in the shale patch.

Volatility Reports 4/10/23

Pioneer’s size would likely put an acquisition of the company ahead of the U.S. oil industry’s most recent blockbuster, Occidental Petroleum Corp.’s 2019 purchase of Anadarko Petroleum Corp. for about $38 billion, and top Exxon’s 2010 acquisition of XTO Energy Inc. for more than $30 billion. That said, nothing is guaranteed in the energy sector which together with crypto, has emerged as the most hated industry of the so-called Democrats. In 2020, when the price of oil collapsed, and when many were doubting that Exxon would avoid bankruptcy, it subsequently emerged (again via the WSJ) that Exxon was considering a merger with Chevron, the energy sector’s 2nd largest company. Back then, talks between Exxon and Chevron were preliminary and yielded no result. Whether or not there is a favorable outcome for Exxon this time will depend on who the next president is.


Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
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