The market continues to move on the latest headlines, as we are simply trading on emotion at this point in time.
Crude Oil
Crude oil continues to be a huge mess, mainly due to the fact that the market fell apart on word that the Americans and the Iranians might be speaking. This was sent out into social media by the President of the United States, but since then we've seen several denials by the Iranians. So, the question is, can we continue to fall apart?
This is a situation where I think you have to look at the technical analysis and maybe try to trade that. I also think that it's probably smart to leave oil alone. Crude oil has tested the 61.8% Fibonacci retracement level and now the Iranians are starting to push back on the idea that there's any talk, so we'll see whether or not we can bounce from here.
Managing Extreme Volatility
The $84 level should be considered support as well, and if we were to break below there, it opens up a drop down to $78.50. A rally from here could open up the possibility of a move toward the $100 level and quite frankly it would only take an errant missile to make that happen.
The main takeaway here is that the markets are extraordinarily volatile and you will have to be very cautious with your position sizing as a result. In this type of environment, it wouldn't take much to make the market jump $5 a barrel in one direction or the other, but I would still suggest that the real risk is probably to the upside here, not the down, although the down cannot be written off. Make sure that you are not risking too much in crude oil. My email box has been full of people who have destroyed their accounts in the last couple of weeks, and I suspect I'm about to get more of those emails.