Europe Melts Down as Commodities Go Parabolic

In this week's Macro Insight I discussed...


WILD MOVES ACROSS ASSETS

Markets remain in turmoil since the invasion of Ukraine. Commodity markets remain the epicentre of the volatility with 2-6 sigma moves across the board. European equity and bond markets feeling the contagion as markets price in a potential recession as demand gets destroyed by higher prices of food and energy.

PARALLELS FROM 1973-4 STAGFLATION ERA?

Hartnett of BoA points out that “war is stagflationary” drawing parallels to the Yom Kippur War and Oil shock of 1973. Only commodities outperformed inflation and SPX was down 40%.

SPX PRICE ACTION LAST WEEK

SPX bounced around violently in a range last week capped by the 4400/44450 resistance band I had pointed out and to the downside tested support at 4280 multiple times.

I tweeted at the weekend that this support looked fragile and seemed to be weakening and so it was no surprise to see it break down yesterday.


OPTIONS POSITIONING AND VIX

SPX below the Put Wall area, so on the look out for protection unwinds to maybe fuel a bounce.

VIX has spiked but compared to things like V2X and MOVE, it’s still got a lot of room to rise. We may need to see 50ish levels before this episode is over!

EURUSD RE-TESTS KEY SUPPORT AT 1.08

Massive breakdown in EURUSD down towards 1.08 lows due to the European economy pricing in a recession risk due to commodity prices.


PARABOLIC MOVES IN COMMODITIES

Another day, another commodity up 50%!

EU Gas, Wheat, and now Nickel all going parabolic as margin calls force short covering as physical inventories held against short futures cannot be delivered due to sanctions.

GOLD BREAKS ABOVE 2000

Gold finally takes out 2000 as real yields collapse, geopolitical tensions remain, and other foreign central banks realise that the USD reserves they hold could be a liability rather than an asset in times of need.


Filmed on on Tuesday 8th March 2022.


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