Nice move, oil market. I’d not call it checkmate. But I salute your conviction.
I’ve already held this long; and thanks to my untimely added purchases of my jackass UCO position, my losses year to date stand around 25%. I had myself a miniature blow up, more than twice as vicious as last year.
But as I sit here gazing out my window, taking evenly spaced, deep breaths, the mature and non-panicked conclusion that I’m reaching is that it doesn’t make sense to cover here.
In terms of crude oil, I’m right back where I started save for a lower net value.
I still have the gains booked from my ERX short, and the shares I added to the rest of my positions. I also have lots of booked losses from ducking in and out of UCO, which can be used to escape some positions.
I will be patient; there’s no good reason for these huge morning gaps, except that traders are chasing momentum trying to save their year, and aren’t thinking about the fundamentals at all. So crude oil goes higher; maybe to $110, maybe more.
Production numbers out of Europe have been consistently bad, production in the U.S. has been okay but not offsetting, and emerging markets are chained to Europe. Meanwhile, $100 crude oil comes with its own consequences to economic output and forces the Fed to think long and hard before acting. That’ll leave the dollar intact as the euro collapses, adding to the other downward pressure as global supply continues to ramp up and demand softens.
If I was forced to guess when the oil market will finally reverse, I could only give a range; sometime in the next 3 months or bust. This reminds me exactly of July when I first started betting against crude oil, save I already have this position. It would be two whole months before I saw my expected outcome materialize then. It could be just as long now.
In the meantime, I will control risk through the rest of my portfolio. I will also look to see if it isn’t advantageous to sell something to take advantage of these losses.
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Not even a debka rumor about the impending bombing of Iran.
Pricing in a nuke bombing and then when it happens it will fall like a rock after the initial spike.
Like clockwork.
Mmm, yes yes, classic.
Debka was a little slow today, but the Iran war article is now available on their website. Should be good for a couple dollars before the inevitbale collapse of WTI.
I will be waiting for bad news from China. Til then, I can only watch the oil market in amazement.
I wish I was only watching the oil market in amazement.
Looking at the weekly technical chart, which is the only thing that could ever be consistently tradeable IMO, we find that the price moves are not consistent at all… no wonder this is eating you. I would get out and find something more consistent to invest in. Even silver has been more consistent, from a technical perspective, despite all the manipulation.
http://stockcharts.com/h-sc/ui?s=UCO&p=W&b=5&g=0&id=p87827064195
SCO down another 5% today … unbelievable …
It’s derivatives, there is no reason to be long these ETF products. Zero, zilch, non…however you want to say it, they are implosions waiting to happen.
Good shorts, though.
you holding steady on your euo positions,no /yes ? add maybe.it’s hard to try and time it’s demise.my trigger finger is gettin itchy
My EUO position is staying on, I’m looking for a big move, not this 3% gain garbage I’ve got now.
Cain- Last night at 2AM I allowed some of my thoughts to fall out of my head and coalesce in a post on the Fly’s last thread, but I’d like to re-post it here to perhaps elicit a response as I think it may apply better here (I made a couple minor changes):
As I said two weeks ago, the stock market and the dollar can work in tandem pushing us higher. If we narrow our view to the immediate term, we have seen PMI numbers in Europe come down, EU GDP numbers drop a little, EU retail sales drop, global growth expectations cut, US GDP up, Fed manufacturer numbers halt their deep momentary contraction, decent US retail sales, US trade deficit shrinking a little (also a new trade pact announced), a US government that remains spendthrift at the moment(debt ceiling raised), and the US exhibiting the strongest stock market globally. Prolonged low interest rates in the US tip investment plans by US corporations to pull forward capex due to increased attractiveness to profitability via their NPV/IRR calculations that use miniscule discount rates to assess investment. It also helps that IRS code 179 of accelerated depreciation favors capex (software and industrial equipment). So you have a backdrop for non-speculative flow that demands USD, which the markets are starting to confirm.
The high interest rate currencies representing strong carry net interest margin have unwound vis a vis AUD/USD while speculative flows remain strong in the yen. Speculators have exited the CHF after the SNB interventions and are in the process of leaving the euro after the ESFS headline carpet bombings. Safety may return to the CHF, USD, or JPY as they represent relatively stable currencies. So speculators may return to the USD- two checkmarks.
Food inflation has affected non-US countries to a large extent but in recent weeks it is becoming evident that crude oil is taking the place of food commodity based inflation. If you notice on the St. Louis Fed’s website (http://research.stlouisfed.org/fred2/categories/32217), while regular unleaded prices have started to come down, diesel prices are increasing. One form of causality supporting this effect would be that there is economic activity to support crude as most heavy moving and industrial vehicles use diesel. Inventory must be moving throughout the supply chain too, albeit negatively as businesses pare down some goods held amidst uncertainty. Anecdotally, strong e-commerce sales can supplant weakening retail sales as gasoline sales tugged down the latest numbers while electronics and appliance stores were the biggest drivers. Savings rates are also subsiding in the US which could lead to asset investment and increased consumer spending. A need for dollar-denominated commodities provides further support for the USD.
Overall, I don’t think this will support a full blown bull market. The Asian trade balance still remains strong and currency spats between China and the US are ongoing and unresolved, uncertainty remains prevalent in what US banks hold on their balance sheets in terms of EU debt, the government budget is still being debated, housing and unemployment remain the albatross around the neck of the Fed and DC, and QE rhetoric in the US is currently in the dugout riding the bench at the moment. I think we can see some strength in the US stock market (tech, ag, industrial) and the USD as long as the above state of affairs perpetuate, but as the above uncertainties become realities it will be easier to see if a bull market lies ahead.
The USD can outperform to an extent as a currency of safety but its low interest rates detract from its attractiveness for speculative longer term capital inflow. Also, as the capex spent by corporations comes online, money velocity can pick up and the trade budget may start to reverse.
These are just some things I’ve been thinking about that I wanted to write down but couldn’t fit into a 140-letter message.
I would agree with everything you wrote except the consideration of bond yield in pricing in currency value.
I think where we are, bond yield has no effect for the moment; it’s all about safety in the bond and currency world.
I can understand getting excited about the increase in U.S. manufacturing and the build in inventories. We need it and it’s a healthy economic boost.
But the price of oil is way too high, even with the increased U.S. output. The amount of excess supply swamping the system right now is being totally ignored in favor of small signs of growth.
You really need to write in the blogger network, Hmmm.
Here’s what I don’t understand, adding to a losing position. The market is all about capital preservation. Even Fly has said to cut your losses at 10 percent.
Oh I haven’t added to it recently; I actually cut it back from what it was about mid-level.
I have one last bullet in the chamber; that increase in the UCO short or perhaps a strategic purchase of SCO would bring my position to the size it was back before October.
Not adding to a losing position. called n”Averaging down”
done at the corrrect time, get out with minamail losses or Break even if you know your position is wrong.
practice on fx micro lots ! all the pro’s do it
Sorry Cain…..I tried to follow you into this trade, as UCO looks to be breaking down here…Except this happened:
Date of Order: 11/16/2011
Time of Order: 12:52:20 EDT
Status of order: Rejected
WTF…
I guess they knew a rally was in the card and were trying to protect me. What a great brokerage.
lol
Not adding to a losing position. called n”Averaging down”
done at the corrrect time, get out with minamail losses or Break even if you know your position is wrong.
practice on fx micro lots ! all the pro’s do it
http://finance.yahoo.com/q?s=sco&ql=1
is this true, SCO average volume is about 1.2M, it has already over 3M traded …
Probably