Don't Fight The Market

You are not going to win fighting against the market. If you don't believe that, then you are either in 1) denial, 2) inexperienced, or 3) impossibly confident. Either way, you won't like what you see in the near term no matter if you are eventually proven right or not.

There's a reason why veterans of the market always say things like, "Respect the market." There's a subtle difference between respecting what the market has to say and holding onto your conviction. And that subtle difference is you have to be right.

For you to be right when you go against the market, you have to understand the opposing view better than the opposition. Once you do, you break down their analysis and find the chink in the armor. That's how you find your edge, and that's how you can go against the market without getting killed in the process.

Now reverting this back to the oil market, we've been hammering away one point this past week: the market clearly believes in something and that something is bad for prices.

And as we saw with the price action yesterday despite the two bullish news items: 1) OPEC+ symbolic production cut and 2) Iran deal far from concluding. The oil market still sold off on China's COVID lockdown worries.

Now if this is the thesis the market is buying and oil is in the process of breaking down because of China, then let's try and understand the China story.

Above is a satellite capture of China's onshore crude inventories. Unlike April when crude inventories began to build, China has actually been reducing onshore inventories.