Conventional wisdom is wrong on oil & markets

Discussion in 'Trading' started by detective, Apr 18, 2008.

  1. The conventional wisdom has been that higher crude oil is bad for stocks. That is completely idiotic simpleton analysis. The energy, infrastructure, and ag plays feed off of higher crude prices, sure, higher crude hurts the airlines and the truckers, but what % of the S&P are they? Higher crude has almost no effect on tech, financials, etc.

    The people who are going to be hurt with higher crude prices are those who don't have enough spare cash to buy stocks or expensive goods. They are the poor, living paycheck to paycheck, where a few extra dollars spent on fuel hurts, they don't matter to the stock market. If they are suffering, it means nothing to the market.

    Crude closed almost at $117 today, are there still doubters about the rally? This with the dollar gaining on the euro.

    Now everyone is saying that its a blowoff top with speculators jumping in, but according to COT futures open interest data that came out today, the speculators increased short positions while the commercials have increased long positions.

    If crude oil pulls back significantly, it will be bad news for the stock market. The oil and ag plays have been the building blocks for this latest rally.
  2. S2007S


    Higher prices have no effect on Technology or finance???

    That reminds me when I heard the talking heads say that technology was immune to the subprime mortgage crisis, man did they get that wrong, it also reminds me of how casino stocks are recession proof, that is FU$king funny as well.

    Commodities are in a BIG, BIG, BIG bubble, the question of course isnt if, its when.....Crude oil will pull back significantly taking many people by surprise. Everyone knows bull markets only last so long, oil is well overpriced and manipulated to the point where its ready to correct at least 20%.

    and please ignore the COT, its serves no purpose....
  3. piezoe


    I'm afraid you have rather seriously underestimated the effects of high energy costs, much as Gore Vidal overstated his case when he said "Conventional wisdom is almost always wrong."
  4. Speaking of Crude Oil, you've posted several times this week that you were buying the DUG ( inverse crude ETF ). Last time I checked, that ETF lost 15% this week alone. Care to tell us where your average price is and how much capital you have committed to this trade?
    Where is your stop loss?
  5. You forgot to mention that the COT data ( as of April 15th ) shows that commercials not only increased their long positions, but ALSO their short positions ( from 923,845 to 936,837 ) for a net increase of 2,000 contracts to the long side vs the previous week's data. Not that big of a deal.

    Heading into the last short-term "peak" in crude, the commercials got up to 996,000 contracts short back in the week recorded ending March 11th, just two days before the peak at $109.60 in the May contract.

    I think that you are onto something, but next week's data should be more revealing. The Energy component of the SPX is indeed fairly weighty, so the stock market will obviously suffer during the first few days of an energy sector "correction" . . . But at some point there will be rotation into yet another sector or sectors.
  6. The world is at its limits for natural resources with emerging markets developing and demanding more food and energy. The Chinese want the American lifestyle, and they want to drive cars and eat a lot of beef, chicken, and pork. Demand is still rising globally despite $116 crude. Until there is demand destruction, crude oil prices will keep going higher. We're not even close to that point. Supply is flat and even at these prices, no new supply is coming in.

    Those idiots on TV running the braindead mutual funds are trying to brainwash the public into thinking commodities are a bubble while urging you to buy unwanted stocks in a bear market.
  7. sumosam


    Agreed. The sector rotation is now into the financials. There are only retail left to buy into the commodities....a sign of a reversal
  8. Couldn't agree more...commodities will reach obscene levels yet before we reach any kind of blow off top...years away.

  9. You clearly watch far too much TV.
    Perhaps that is why you are still "paper" trading.

    Why don't you do us all a big favor here on ET and take your "cut and paste" style of posting and "blah, blah, blah" headline news reports to some other message board that really cares.

    Your "act" is getting really old.
    And I'm certain that I'm not the ONLY one here on ET that feels this way . . .