Market is volatile. Oil has plunged to multi multi year low.
Amid all calls of Oil hitting 20 $, it is actually stronger y’day. Now, if Oil goes up, that means inflation is higher. All across the world. And then interest rate will go up faster. If so, then market will collapse even more.
If that is a possible scenario, will Oil Long and Market Short be a good trade?
I am not suggesting to trade this. Just musing ….
Now, why will Oil may go up? There may be few reasons. One is that it is at historic low and is showing (at least temporary) support for now. And some world market big traders are making transactions that point to potential strenght in upcomng months.
Now, if Oil actually continues falling, what will happen? Probably it will lead to sevearl bankrupcies of heavily debted companies. Which are plentiful. If that happens, In turn, that will lead to another crisis of sort. How much it will impact broad market is an unknown. However, it will probably lead to deflation. And US Central bank has almost zero interest rate. It cannot cut rate any more to fight it out !
In either case of Oil scenario, it does not look good for broad market. Is it becoming like a double edged sword?
However, that does not mean market will necessarily collapse. As there are many other factors influencing broad market than only Oil ! Too many to comprehend and assimilate.
Yet, once we know the potential playing out of Oil market AND keep an eye on CUE charts (or whatever system you use) on Oil as well as broad market, there may be some very interesting investments and trade ideas that could unfold. Rather, already unfolding?
It is indeed interesting time.
Invest safely. Keeping risk management at the forefront. More so now than ever in this volatile market.