I thought I'd post some of my longer term thoughts. My personal take on oil is that it will trade in line with equities depending on the economic outlook. However, headline risk is what could cause it to diverge: Future conflict in Iran (http://www.debka.com/article/8794/ , http://www.timesonline.co.uk/tol/news/world/europe/article7140282.ece) or North Korea Supply interruptions from the Gulf crisis (MMS email caused thursday's price spikes http://www.msnbc.msn.com/id/37494561/ns/us_news-washington_post/ , what's the regulatory response if a hurricane rains oil) Continued interruptions in the trans Alaska pipeline (very unlikely this is a recurring problem but still, http://www.marketwatch.com/story/tr...fter-shutdown-2010-05-30?reflink=MW_news_stmp). My nightmare scenario is that equities start selling off hard and a black swan event spikes oil big time. If you have watched every Obama speech for the last couple of years as I have then you know the man is behind alternative energy in a big way. Most progressives, however, believe we will never get substantial investment in alternatives until the price of oil is sky high. Looking at the slow policy response in the Gulf is this just a strategy for building political support against all kinds of drilling? What happens when a hurricane rains oil? Will we drill in the gulf ever again, shallow water included? Of course this is in the realm of conspiracy but still crosses my mind. If oil dropped below 65 I'd strongly consider buying some October calls. Turning to the euro. My fear in Europe is that a default by one nation will cascade into a default by many others similar to the way Mexico's default led to 20 other countries also defaulting on their debt in the 1980's. What bothers me even more is that Germany (expected to bail the EU out) may already be taking steps to reinstate the deutschemark (http://www.zerohedge.com/article/morgan-stanley-warns-germany-may-decide-secede-emu). If the ECB turns on the printing press this could be a likely outcome. Watching the euro trade over the last 2 weeks there were 3 if not 4 times where there appeared to be definite Central Bank intervention with each successive time being less successful. Which makes me think, when would Central Bank intervention not work? The conclusion I draw is that the players whom the intervention is supposed to help are actively working against it. If governments or large European banks are using these interventions to dump euros then this could possibly explain the descending triangle pattern seen on the eur/usd chart before its drop below 1.20. The fact that Greek state owned banks were the highest holders of Greek CDS makes me think this is a strong possibility. This is all speculation of course and the truth wont appear in the media until its too late. One other tidbit that caught my attention and is hard to verify comes from this round table with Hugh Hendry. The part of interest comes shortly after 4:30 in the clip: http://www.youtube.com/watch?v=E4MAifsp-8E&feature=related Of course Euro weakness is bearish for oil. The two have been correlated pretty strongly for at least the last 8years. All you have to do is look at a monthly chart of the two side by side to see this. I'm pretty sure they both topped at almost the exact same point in 2008. At a certain point though a complete breakdown in Europe would probably end this correlation. How this plays out could depend on the ECB response, do they print or do they just allow a series of sovereign defaults to occur, does this break up the EU? I imagine a lot of volatility in oil prices would ensue either way. So how about equities? Goldman came out with a forecast a little over a week ago saying the S&P would reach a series of successively higher levels. I honestly believe the only reason they did this was to go after the dumbest of the dumb money. They know they wont convince the smart money but maybe just maybe they can dump some equities off on some pensions and other institutional investors before the crash. Add to this Larry Fink of BlackRock and Warren Buffet came out with similiar messages in a last ditch effort to restore confidence. Or worse just put up a smoke screen to unload positions into. The complete failure of the S&P to get above the 200 day avg last week even after many attempts shows how desperate the situation is. Honestly I thought we would rally to the 50 day before the crash resumed but it looks like it aint happening. All eyes next week will be looking to see where we go first 1100 or 1040 and what happens when we get there. Personally I'm very negative at this point if you couldn't tell already. A strong S&P sell off would coincide with a strong oil sell off. A close below 1040 could trigger a lot of panic buttons. So if trends stay normal euro down, equities down, oil down. However, while event risk could push the euro and equities further down, it could do the opposite to oil. This summer I'll be looking for early signs of divergence. Sunday night should be interesting. I'll be looking for a policy response from Europe. If they do nothing, then markets probably continue selling off. If they do something big and markets can't rally, then I'd imagine we have an even bigger sell off. Just my two cents.
you mean "hunch". I think that needs intensive screen time. most time when I put a "what the hell" trade, I have no thoughts, just an urge to put on a trade and the trade turns out to be in my favor. sometimes, I am just amazed how I turn my wheel to drive my car, when I see a curving road, my hand automatically slightly turns my wheel and fit my fast moving car in the lane forward, while my mind does nothing work (direct my hands to turn, turn how much..), it seems built-in and so natural. like last week, when I see ES and your posting, my mind just popped two number 1067 to 1099 for that session. how odd it is? then I followed that hunch, and it turned out to be great.
good analysis. I wish I learned politics and economics. as a trader, I feel negative for the forward week too. first next week we do not have much economic data roll out, maybe the retail sale friday. or if euro zone or china may have something polices or economic data? or IRAN/northern Korea stire up something terrible and Crude way up /way down significantly, most time I just focus on u.s. local's. fundamentally crude is a very compilicated stuff. I am too lazy to do analysis. technically we know crude is trending down, if it breaks our recent new low 67.15, those days up/down will be a consolidation zone, significant break down? who knows, if the market is all technical, we all rich now. I wish I knew something about geo-politics/economic
This guy was calling a market crash over Europe in early April when the market was still in the eternal bull run. He thought it would take a few months to happen and suggested in late April buying puts as soon as SPY breached 118.00. The breach of 118 was golden and the follow through happened far more rapidly than he expected, but he's still expecting a lot more downside. http://www.1option.com/index.php/gl...weak_employment_signals_double_dip_recession/
When Cramer put in a sell recommendation on equities Friday, I had the same thought EON, do you strictly trade crude intraday, or do you swing positions?
Just intraday, been airing some longer calls which don't have a good success rate. Although my methods are still rapidly evolving. I'm watching for a strong reversal of 70, If that happens, I'll be looking for a measured move of the 0525-0528 leg to about 7860, but also looking for a reverse test of the major trendline from Feb 09 which at the 83 area will give a large HnS ~ over the last 6 months All this bearishness is giving me the heebiedabajeebies
that is cynical. I hate that guy too. but who cares what he said.if no news, the market tends to be negative more than positive, that is wall street's wisdom.