Paulo Macro — Weekend thread: refiner-crack "jaws of death", tightening gasoline, a Korea topping tell
"Jeez what a week. Pain everywhere, even if the S&P didn't show it." A massacre across long/short, EM and China/HK; opex resets positioning; oil's crack/flat-price divergence sets up a whiplash, and EWY is the new-high-into-weak-breadth tell.
One-line take: A brutal week — "pain everywhere even if the S&P didn't show it," with long/short, long-only, retail, China/HK and EM all "massacred." Opex (moved to Thursday ahead of Friday's Juneteenth holiday) "reset a lot of positioning"; with quarter-end ahead and liquidity "dreadful," Paulo thinks "we are close to another skid lower." On oil he stays a frustrated bull: refiner cracks are rallying while crude flat price collapsed — the "jaws of death" he expects to close when China lifts its product-export ban (his catalyst, "and I'm sticking to it"). Gasoline front spreads (Jul–Aug) are "twitching," PADD1 scarce, PADD2 tight on crude, "draws everywhere"; crude sentiment is "ABYSMAL" but positioning hasn't capitulated to match (Monday's delayed CoT will tell) — "the setup for whiplash is there." Chart 3: he's "always eyes peeled for new highs into weak divergence," and Exhibit C = MSCI Korea (EWY): a possible top on thin breadth/volume. "Feels like we are close to something. Stay frosty."
1. Stocks & names mentioned
| Ticker | Name | Research | View | What's said | Source |
|---|
| EWY | iShares MSCI South Korea ETF | QT · SA · STK | Negative | Chart 3, "Exhibit C." Paulo is "always eyes peeled for new highs into weak divergence (and if volume and sponsorship/breadth is weak... watch out)" — and EWY is his example: a fresh high he reads as a likely top / topping tell on thin internals. A bearish flag, not a stated short. | note ↗ |
EWY is the iShares MSCI South Korea ETF (NYSE Arca). "View" reflects how it was framed in this note (Negative = flagged as a new-high-into-weak-breadth topping tell, not a stated position). The rest of the note is macro oil — refiner cracks, gasoline front spreads, WTI–Brent, crude positioning/sentiment — with no other named securities. The "Source" link opens the Substack chat note (a written post — no timestamps). Research: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis.
2. Talking points
"Jeez what a week" — pain everywhere
- "Pain everywhere, even if the S&P didn't show it." Generalist long/short, long-only, retail "all massacred"; China/HK "massacred," cheap valuations "massacred," EM "massacred." Not just oil/commodities — a broad, cross-style drawdown.
- Friday opex (moved to Thursday ahead of the Juneteenth holiday) "reset a lot of positioning." With quarter-end next and liquidity "dreadful," "a lot can happen in both directions" — but "I do think we are close to another skid lower."
Chart 1 — Refiner cracks vs oil: the "jaws of death"
- Cracks are rallying even as crude flat price collapsed — "behold the jaws of death." Rallying cracks "lead crude input," so refiners "will pant running flat out" (except China, for now).
- Catalyst to close the divergence: Chinese SOE refiners heard to run hard again in July and were "back lifting cargos earlier this week" — suggesting some "know the product export ban is coming off" (detail in this Sunday's note). "That's my catalyst to close these Jaws of Death, and I'm sticking to it."
Chart 2 — Gasoline front spreads twitching; draws everywhere
- July–Aug gasoline spreads "are twitching." PADD1 "getting scarce," PADD2 "tight on crude," WTI vs Brent "has nearly priced out exports" — "just draws everywhere all over the place." Gasoline "was always going to be the one to move first in June, and this week it moved" (even front-month RBOB vs WTI was twitchy).
- One caveat: the crude-futures "liquidation" didn't take out as much length as he'd expect for crude at $75 — only Monday's (holiday-delayed) Commitment of Traders will confirm.
Sentiment "ABYSMAL" — but positioning must follow
- "Crude bulls are beyond idiots abysmal. Vomit in the trashcan under your desk abysmal." But "sentiment is not enough — we need positioning to reflect it." Cracks are ripe, sentiment putrid — "the setup for whiplash is there," even if it's partly "wishful thinking."
Chart 3 — New highs into weak divergence: MSCI Korea (EWY)
- "I am always eyes peeled for new highs into weak divergence (and if volume and sponsorship/breadth is weak... watch out)." Exhibit C = MSCI Korea (EWY) — a new high he reads as a topping tell on thin internals.
- "Feels like we are close to something. Stay frosty... good weekend all."
3. In plain English
A jargon-free summary of the thesis behind each name — what it actually is and why that view. (Plain-language companion to the table above; renders on each ticker's consolidated page.)
EWY — iShares MSCI South Korea ETF Negative
EWY is a fund that holds a basket of South Korea's biggest listed companies (Samsung, SK Hynix and the like), so its price tracks the Korean stock market. Paulo isn't analyzing Korea's economy here — he's using EWY as a textbook chart example. His rule: when an index makes a fresh new high but the "internals" are weak — few stocks participating (thin breadth), light trading volume, little real buying support (sponsorship) — that new high is often a trap that marks a top rather than the start of a bigger move.
EWY, he says, is exactly that setup right now ("Exhibit C"): a new high on weak divergence, so "watch out." It's a cautionary flag in a week he describes as broadly painful, not a stated short position — his way of saying risk assets "feel close to something," likely another leg down.
Key points extracted from the public Substack chat note (in transcript.txt) for personal study. Not investment advice. © Paulo Macro for source material.