Click chart to enlargeThe chart of OIL (above) shows that while CNBC reports a lower Dow due to an oil "spike", we haven't really spiked at all... yet. When a chart hits the same top (or bottom) multiple times in a short period of time, as OIL is doing now, the odds favor it breaking through that top or bottom. Our guess is that OIL will actually spike when it breaks resistance at approx 83. It could go as high as 88 on its next run. A spike like that could cause the Dow to truly capitulate and put in a real bottom.
It's hard to mention oil without reminding everyone how we got into this mess to begin with. Here's a quick recap:
Dick Cheney was the former CEO of Halliburton. Upon his acquittal (lol), he left with some parting gifts, namely, stock options. Once he became the VP of the United States, he was able to impact the success of Halliburton by giving tens of billions of dollars in Iraq war related oil services contracts to them. In addition, he was in a unique position to encourage America's overconsumption of oil by offering tax incentives to consumers who purchased vehicles with the highest gas consumption. Now, as the Fed wants to intervene by raising rates to keep inflation at bay (at 8% a year), they find they cannot because Americans are spending so much on oil that they can't afford higher interest payments.
In lieu of rate hikes to help the situation, we could all benefit from a check sent to each household that comes from Cheney's Halliburton stock option profits, which are in the tens of millions. We check our mailbox every few hours waiting for that check, but it has yet to come. Accountability is only for members of the middle class.
5 comments:
Well, that happened a lot sooner than expected! As we type, OIL has broken above resistance and is pulling the Dow significantly lower. Tomorrow could put in a tradable bottom if OIL hits the top of the channel and the Dow sells off big intraday. Only problem is, being that tomorrow is Friday, the shorts won't be placing large bets ahead of the weekend, so the real selloff may not happen in force as it might if tomorrow were a Tuesday. No harm in starting to buy a little DDM here below 62.5
Hey Snot, I have started accumulating longs from yesterday onwards peacemeal. Totally about 25% invested. Probably, I am a bit early but my theory is something like this:-
http://maybeitsclarke.blogspot.com/2008/06/dow-jones.html
Would definitely appreciate your opinion.
--clarke
Clarke, very glad to see you started a blog! We'll add it to favorites and check out what you're up to with your trading. You should add a counter. Go to google and search for free counters. There are many of them.
Glad to hear you're only 25% invested. We're at about 18% or so, but bought some DDM at 62 which probably puts us at 20% now. SMN was the only thing really working for us today, but we lost very little because we're all Ag, and only 20% at that.
Just waiting to pile in to POT, CF, MOS and AGU if/when they finally give in to the pressure.
Would like to see when you think Ag is ready to be bought in force. If history is any guide, Ag is the last to fall (literally only falling on the last day or two of a correction). They held up very well today considering. MTL bounced off its 100dma within pennies of it... amazing how strong a support that is. It may not hold out if this correction gets any worse though.
Ok I will add a counter.
As you have mentioned in your post earlier, I prefer SID over MTL. MTL did not make a significant new high in this iteration. Also, I think there is some MACD divergence on MTL, which is not bullish.
Every 6 months or so POT has one huge dip. The last dip was in jan. I just think the dip for pot is around the corner, somewhere.
I am in UYG av@22.01. I liked the fact that today financials did not get hammered like the rest of the market.
--clarke
UYG was down 7.6% today while the major indexes were down about 3.1%. Times 2 that is 6.2%, so it doesn't sound like financials escaped much today. They rallied Tuesday and Wednesday. Maybe you were referring to Wednesday. Best of wishes to you on UYG. Hope you get a good pop. Maybe we'll have some hype from the FED to help, since anything they do seems to help financials the most.
Snot, what about railroads as a semi-agricultural play in a time of high oil? BRKB wasn't hammered the last few days nearly as hard as the market in part because of WB's love of railroad plays. See this article:
Link
JSW
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