Short the Short Squeeze on Crude Oil & UCO, and shorting on Russia related assets

 I、Short the Short Squeeze on Crude Oil & UCO

On Monday night (March 7^th), I posted this paragraph in the group, “Since Russia invaded Ukraine, crude oil, the king of commodities, has been rising violently. Today, Brent reached as high as $139.13 and is currently at $125.62; WTI reached as high as $130.5 and is currently at $121.14, which is a pretty good opportunity to go short on rallies”, and predicted that crude oil price could drop to a little less than $90 before the middle of the year, and ProShares Ultra Bloomberg Crude Oil (UCO) may drop to $90 level and possibly worse.

The projection of oil price going up to $150 or even $200 is hardly achievable, especially considering: 1. with such elevated high oil price, the major economies around the world will certainly be in a recession pretty soon, which isn't politically wise. 2. Serious demand destruction, the enemy of high oil price is itself; 3. The governments of the major economies will have to take various measures to curb high inflation dominated by high oil prices, try the best for the purpose to maintain short-term relative stability; 4. It is difficult for Russia to invade Ukraine for long. Yesterday, Ukraine president Zelensky made it clear that, after learning that NATO was unwilling to accept Ukraine, he was no longer entangled in joining NATO (cooled down), and at the same time he was willing to discuss with Russia regarding “Donetsk People's Republic” and “Luhansk People's Republic” in order to find a compromise. With both sides have the willingness to compromise somewhat, now comes the art of negotiations to end the war, though it might take some time to settle down on a solid peaceful plan.

The short squeeze, by pumping commodity prices to way elevated level, seriously deviated from the supply demand dynamics, doomed to be impossible to sustain, as demand destruction is one of the most important fundamentals. Today, both WTI and Brent crude oil price dropped a little over 10%, and UCO dropped a little over 20%. We likely have seen the top of the crude oil price, though there will be some back and forth until crude oil settles around $90 level, thus likely there will be some opportunities to short the rallies between now and then.

II、The Shorting of the Russia related assets – RSX & RUSL

The above was the screen shot posted in the group during the market hours on Feb 21^st. And since then, I posted quite a few commentaries to analysis the short-term risks of risky assets caused by Russia's invasion of Ukraine, especially the dollar denominated VanEck Vectors Russia ETF (RSX) and Direxion Daily Russia Bull 2X Shares (RUSL), such as the following screen short posted in the group on Feb 23^nd，and surely enough, RSX dropped like a rock ever since and leveraged RUSL dropped even quicker，as no matter what, Putin will very likely lose at the end.

III、Rock solid bottom still yet to come, and Swing trading

Here's a paragraph from my January article 《End of a Currency Carnival Era & Rising Global Stagflation Risk》：“very likely we haven't seen the rock solid bottom yet, which could be around 4000 for S&P500 in the first half, after considering the Pendulum Effect – momentum to the downside”, and a paragraph posted at late night of Feb 21st：【However, Rome was not built in a day, a rock solid bottom most likely will take some time to be materialized, and the exact bottom is anybody's guess, yet surely there will be technical rebounds along the way, and such rebound can be comparatively sizable sometimes as well, such as in the magnitude around 4-5%, as the big worries of all the possible consequences including “Nuclear blackmail” regarding Russia's invasion of Ukraine will be reduced. Thus, it is strongly recommended to use the current panic selling in the major index futures as a good opportunity to at least lock in partial or even all profits of short positions, and go long on some selected long-term good value stocks tomorrow(Tuesday), such as the recent badly beaten down Intel(INTC), use the strategy similar to this paragraph in my January article 《End of a Currency Carnival Era & Rising Global Stagflation Risk》：“Under the current overall global trend of tightening liquidity, it's better to look for global deep value to buy at the low (require much more patience and reduced expectations, such as, through selling secured puts to entering a position for the long-term investment at a very likely better price, then apply the DRIP strategy supplemented by routinely selling out of the money covered call), adhere to the long-term investment philosophy of value supplemented by growth, and meanwhile, need to short the rally on the over hyped speculative stocks, and supplemented by hedge and swing trading.”】

Note：All screen shots are from【Swing Trading、Quantitative Strategy、Short Hedging and Asset Allocation】WeChat group.