The US stock market has moved dramatically lower while oil collapsed; waiting for proper setups and understanding risks is now critical, asserts Chris Vermeulen, trading specialist and editor of The Technical Traders.
The war on oil has officially started. To me, it’s a typical bully/bad guy move. When everyone is bleeding, and in trouble like the financial markets, everyone’s mental state, and our health, the true bullies and bad guys (sharks) come out of the woodwork.
Russia is being difficult and will keep production high for oil; the Saudis are giving out hug discounts on oil and jacking up their production to flood the market with their oil and take as much of the market share possibly. When blood is in the water, the sharks attack.
This oil war is going to devastate the USA and Canadian oil sectors and businesses if the price of oil trades between $20-35 per barrel, which I think is what will happen and could last a few years.
This is a huge breakdown in the US markets and indicates much greater weakness within the global markets and further concern that the COVID-19 virus may continue to disrupt the US and European markets (as well as others).
The potential that multiple billion-dollar disruptions in the US and other foreign markets, including travel, leisure, autos, hospitality, and many others, may see a continued decline in sales and incomes over the next 6+ months.
We don’t believe we will truly understand the total scope of this COVID-19 virus event until possibly well after July 2020.
The crazy part is I’m in a little secluded town in Canada, and people are starting to panic and buy food and toilet paper for their bunker stash. Almost everyone I talked to this weekend while out snowboarding has been affected by manufacturing, trade show cancellations, travel restrictions, etc.
We are in a full out global crisis that seems to affect everyone in some way no matter their location, occupation, or business.
There will be some great opportunities to find and execute incredible trading opportunities — yet the risks are very high right now for volatility and price rotation. Think of the markets like a body of water in a severe storm. The waters are very choppy, unstable, and chaotic — just like the markets.
Unless you have the right information, skills, and vehicle to navigate these waters, there is a very high probability that a dangerous outcome could happen.
Timing your entries and targets is critical. Learning to stay away from excessive risk is essential. Please be well aware that the current market environment is very dangerous for traders. Right now, cash is king.
