If the pace of the sell off maintains, No worries... but I would suspect it could catch a bid at the 30 level which is roughly the 50% retrace of the past 2 weeks. At that point I'd imagine it will catch a bid for a day or 2 and then leg down again....
My imagination says sell off tusday and then the sell off stops on wed or thursday. Catches a bid.. maybe the whole market goes up on friday and monday... and at that point, maybe the whole market hits my 1450 SPX... "top" Then maybe we stall and sell off....... remember week after next is the NFP week.... I'm suspecting a revision on april and maybe a larger decline in the NFP, back to a -60k - -80K... but I'm not good at guessing that number..... but it's not like the market believed the -20K last time.
Remember, the market is actually very stupid... Remember "Weak Dollar will save us".
Sunday, May 25, 2008
If I were long trading the Dug
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2 comments:
For me the impulse is to try to bottom-tick DUG (top-tick oil), and I have decided to fight that impulse, mainly because I have been busy at work and have not been able to keep a close watch on the minute to minute movements.
So, I have surmised that the oil futures are overbought based on technicals abut also fundamentals of the market. As you have said, the demand has not tripled and the supply has not been halved, so at least some of the run-up has been froth.
If SPY goes up from here it will certainly be due to a decrease in oil because the fed had used all its bullets and the tax rebate stimulus has been priced into the stock market; thus buy DUG.
If the market goes down from here, this will signal a further a weakening of the economy and a strengthening of the thesis of a recession or prolonged downturn which will lead to a pullback in worldwide demand in oil; thus buy DUG.
The only scenario in which DUG is a poor trade is if a geopolitical event occurs. But that is more a reason to hold gold and silver, and perhaps Swiss francs as a hedge. I would still short oil based on the small percentages of such an event.
I doubt oil will get below $100, Without Serious Demand destruction ie.... We need to "See" a global Recession.
But, as oil caught a small bid at 130, it also will catch a pause at 120...
I'd imagine it will be range bound in the 100-120 range...
But who knows how low the service stocks will go...
And... Low oil, is good for Exxon.
It's a good bet, I was just pointing out positions to look for it to catch support. places where maybe you can sell half, and then wait and Reposition your trade.
Another thing is that if the market goes down, oil service stocks will go with it... regardless of the price of oil.
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