Oil and Sugar fall, Credit Agricole and the Franc strong.

As Frank Sinatra would often sing, “…how high the sky”, we ask about the price of crude oil today. After hitting a three year high of $64.77 yesterday it is breaking lower and therefore presents a good trading opportunity to sell it short. This is however hardly a long term recommendation as the price of the commodity visible on the daily chart is clearly up. Remember, in the capital markets the tendency for prices to trend, which means their natural inclination to continue going in the direction that they are going is well founded, documented and understood. This is not to say that the trend always continues or that all trends have specific lengths of time. No. Let’s not get carried away to trader fantasy land. Rather, the herd instinct is wired into humans as well as birds flocking, livestock on the hoof or fish schooling. The herd instinct is arguably the most important psychological characteristic of capital markets. It must be understood and mastered to capitalize and maximize profits when trading. It is the subject of a longer exposition that will be presented here so suffice to say that the persistence of price to continue in a direction is often times a good position to stake out when trading. That the oil price does so only reinforces the point because, fundamentally, meaning the factors present in a market for a good (fundamentals), as opposed to the technicalities of the movement of its price (techincals) overall demand for crude is and has been on the decline for quite some time. Electric cars and more efficient transport engine technology assure this. Yet in short spans of time, days or weeks, within the longer trend there are reversals of that longer trend, called corrections, where you take the opposite direction from the long term prevailing trend and make money on “the reversal”. This is such a time in the oil patch. While the OPEC production ceiling has had some effect that drove and perhaps will continue to drive prices up, we are in a correction that will drive prices down for a bit of time. Maybe a week, maybe to return to its long term decline. Currently, Oil DOWN.

The Swiss Franc, often considered a “safe haven”, not unlike Gold, sort of, (the whole “safe haven” bit has always been somewhat shrouded in smoke and mirrors) nonetheless has clawed back losses accumulated yesterday against the Sterling. Not surprising for what we consider two fundamental reasons. Remember that a fundamental in the capital markets, is a truth that transcends price movements. In other words it is a fact of life in the environment or Eco space s moderns like to call the characteristics surrounding an asset. This as opposed to a technical characteristic which is the behavior of the price movement. Technical behavior usually goes hand in hand with fundamental truths, butt can and often does deviated from them. This ain’t science ladies and gentlemen. This is Social science. Humans are involved here. Never lose sight of that. The first fundamental truth concerning the GBPCHF pair is Brexit. This is indeed a fundamental reality with truly transitional effect. The Brexit has and will continue to produce seismic volatility in the GBP pound for at least the next year and likely for some time after that. The phenomenon is profound. The second fundamental is the Safe haven bit referred to above. While we maintain that this is both in the case of gold and the Swiss, a not entirely clear function, nonetheless traders reliably think otherwise. As the US dollar weakens the Swiss way more often than not responds with strength. As the Ripley people like to say, “believe it or not”. We are trend followers and therefore… GBPCHF DOWN.