Weekend Dec 13 2014
I am amazed at the comments regarding oil. I walked by a CNBC screen yesterday and the gal suggested that so and so was warning of $40 by next spring or summer. My take would be how about $40 oil by Christmas.
WTIC Crude Oil
The weekly close below the $70 level suggests next support at $40, Period. This is about s clear as a chart gets. As I continue to read various articles, I am amazed at teh level of denial, ie that this will have a negative effect. Some 40% of all the drilling rigs in the US are in the Permian Basin, west Texas my former home, or south of San Antonio, my present home, in the Eagle Ford. One story today noted that many of the rigs are under long term contracts to keep drilling. No doubt,but it is hard to believe drilling will continue as the price drops so much that the cost cannot be easily recovered in production.
Not surprisingly this monthly chart of energy stocks in bullish formation is back to the 2009 lows, again suggesting the ultimate ow in oil price has no yet been seen.
No One Could Have For Seen This, Really?
The blue arrow marks the moment of truth. As the US Dollar soared past the price of oil, oil fell, period.
Now while everyone in the media is claiming NO ONE can tell what will happen next, the history of 2008-09 suggests otherwise. As the dollar soared, right to where it is now, oil fell to $40. end of story.
Then the problem was over leveraging on oil bets. Now we have both that and an OPEC determined to squeeze out the competition. So prices could easily go lower than $40, at least n my thinking.
As I was completing this post I got an mail from a reader regarding XLE. XLE as he notes is completing five waves down. On Balance volume is at a higher low than on the third wave confirming this idea. An A B C bounce back to the gap at 85 seems reasonable. But since this decline hapened in five waves, the new trend is down. Thanks for the e mail!
Summation Index and NYSE Stocks
The summation index has been weaker than the price index of the NYSE. Now the NYSE is joining it to the downside.
DOW 30 2 Hour Chart
The Dow was dowwn hard Friday, 1.79%. As the two hour chart is right on the 200 bar MA, we could see a bounce.
Gold and silver have rallied in recent days amid the world chaos. Central Fund is still trading at a 9.5-9.7% discount to its net asset value. This might be a way to take a position at an extreme low. CEF has been cut in half the last three years dropping from 57 to 11. Now at 12 it is at least over its 50 day MA.
I bought some TLT just under 120. it is about to re test the former high. I added the PAR SAR as a reminder to put a stop sell under a position. But if we are right taht stocks are puttingin a multi decade high, bonds should remain in an uptrend well into the spring.
while HDGE is up 3.95% ths week we do not have a clear weeekly buy signal. It seems to be lagging the overall market But then oil stayed up a lot longer than I thought it would as well.
On the daily chart things are getting underway with an assault on the overhead MAs. A five year bull market will not be quickly reversed, the FED will fight this, and apparenly did with th Octo to December counter rally. Patience.
Europe Asia Far East
This fund excludes the US and Canda. This is how aninternational bear market begins, slowly and then gaining momentum.
BRIC the place to be just three months ago
The strong US Dollar and falling oil prices have crushed Brazil and Russia. China has been on a run lately but I am wondering if that is just hedge fund money chasing a market still going up. For all the talk of emerging markets they just managed to re visit the 2012 high.
The Bottom Line
The Dow Jones Industrial mazingly registered its final high right to the day Dece 6 from 40 years ago. The Dow was the last man standing as other indexes like the Russell 2000, NYSE, Dow Transports and Composite peaked months ago or in the case of the last few, Nov 25. And in the same time frame, gold made a low, real money, and has rallied the last few days.
Social mood is turning sharply negative, imagine a President of the US calling on Al Sharpton for counsel! Not surprisingly near riots erupted across the country. This is yet another fractal on our on going New Civil War.
Watch the US Dollar which has been quite strong. A pullback could stimulate short covering in commodity markets.
I am long bonds and HDGE probably the best safe havens at this point.
thanks for reading TMP.
The oil soaked opera Dallas was brought back amid the Permian Eagle Ford Oil Boom. It was certainly fun to see Larry Hagman in fine form as always portraying the ver scheming JR and going toe to toe with Bobby, his Brother, over of course Southfork.
The Western Company was an oil field service company alongthe lines of Halliburton. However its advertising was quite different in the 1970s. Tv ads featured beautiful women clad in hot pants claiming, if you don't have an oil well, get one, you'll love doing business with the Western Company. Western of course went out of business. But positive social mood generates a herd instinct. I ran across this ad on finance.yahoo, in putting this post together. It says it all about where mood was just three months ago. Interestingly I believe this firm is headquartered in San Antonio. Isn' that the same style hat that JR wore on the Dallas tv show?
Our friends at The Socionomist note that Gary Gasparov and I would add, Ralph Peters, think Putin is the most dangerous man in the world. I agree, and the fall in the price of oil makes it more so. He is not about to give up on his abitions. A dictator always needs a punching bag to place the blame for his failed policies. Fidel Castro spent his entire life blaming the US for its embargo on Cuba. Sensing European weakness, and needing more territory which produces real goods, Putin is much more liable to ramp up his aggression than pull it back. Insiide Track has identified mid April 2015 as the beginning of a war cycle. With markets now falling as well as the price of oil. that is about the length of time it should take for the reality of what cheap oil mans for exporters like Russia. Putin is not about to blame Putin for putting all his chips on oil to support Russia, oil is one half their national income. Recall it was the depressed social mood in Europe at the worst of the Depression that allowed Hitler to come to power. Take look at the BRIC chart above, that is where conditions there are headed. And Putin realizes he has a two year window with a US administration that is liable to do little to oppose him.
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