This is still such toppy behavior in oil.
My original thesis when we hit 125 was that we needed a nice correction back to 110 then could proceed higher..... Over all this is a full on correction of the move since 100. I don't have very good crude charts.... But to be honest I wouldn't buy oil at this point... And the euphoria was at the last high.... It's just over.
My current thesis.... Well the charts suggest we still have another low. at a minimum... I keep buying Calls, I just can't help it.
either oil will correct
or the shell game is over.
I have this nightmare that trichet, decides to get all the European banks together, and immediately decides to raise rates, and it kicks off a dollar crisis. Market gets cut in 2.
Uncle Ben found Drooling and mumbling to self in his office. Carted away in straight jacket.
I'm reminded of something somone said about bull markets "bull markets don't shoot up 10% in one day. That is the sign of a bear."
Saturday, June 7, 2008
We all know how I hate fridays
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2 comments:
I like the quote about bull markets not shooting up...
It occurs to me that commodities trade differently than stocks. I just don't see how supply and demand can be trumped by "speculation" when the futures contracts need to be settled at the end of each month.
I remember JDS Uniphase and Sun Micro being taken to the moon because buyers could always be found no matter the stock price in 1999. The same just cannot happen with oil futures, am I right? Rick santelli has pointed this out ad nauseum.
Which means the doubling of oil futures is real, and the oil companies are trading at reasonable valuations, PE's 10 or 11 and divs over 2.5%. And the technicals do not point to oil "rolling over."
Having said ALL that, I still think oil is due for a correction--- based on a slowing economy and the decreased demand. But the recent volatility makes me respect it much more. One bomb flies into Iran and it hits $160.
As much as I love Santelli.
There are people out there making the argument that it is a bubble. and they are commodities traders, and point to that in the past years demand from "Commercial Hedging"(investment bank hedging) has tripled.
At 120, I figured Just a correction was in order, but this action is weird, these are fast 15-20% moves on no news.
Remember Oil moved from 115-135 in a week... On no actual news.
then from 122-137 in 29 hours.
here is something you don't hear.. Say you were China, and you had this huge demand spike for gas and oil... for say this big event... Something like the Olympics, and you had to lode up on gas a few months before....Because the last thing you would want would be a fuel shortage during your big "coming out of the closet"...
Gartman suggested that some of the Tankers are getting "Delayed" out on the water, which also suggests there is a large supply out there waiting for a home. Also, he suggests that too many people are on the Long side of that trade.
Refiners are running at 85% capacity right now, when historically they should be at 95%. Which suggests that they are either Intentionally holding back, or that there just isn't a solid demand.
there is the demand story, and with Morgan Stanly and GS trying to talk up the price of oil... it makes me think they are trying to pump and dump, to get out of the way before the big Fall in prices.
I'm not saying $80, but $100-110.
and gas prices went from $2.50-$3.50, when oil prices have doubled in the last year.... Which says, that the consumer will not get relief at the pump, unless oil can get back to $70.
The banks(who run the speculation, and the etf's) could be rolling into the longer contracts, because they know they can't load into the spot price, which forced the market out of contango, and into a Flat curve a few weeks ago, at settlement.
Ma, and Pa America are making a choice between feeding the kids Mac and Cheese, or driving a few extra trips every week. They couldn't afford $3.50 gas, but this is threatening $5.00
What I'm getting at, and what seems obvious, is there is a "perfect storm" right now, for a Solid Bubble in oil.
I pointed out the other day, that when Wheat and rice was going "Limit Up", that was the top of those markets, now oil is doing the same thing.
But if you are playing that game, play some solid d-fence... cause things can stay irrational longer than you can stay solvent.
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