Annotated Crude Oil
By Barry Ritholtz - October 23rd, 2009, 1:15PM
Another classic annotation from David Singer:
Macro Notes
We don’t want your help because maybe we don’t need itPeter Boockvar
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
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October 23rd, 2009 at 1:32 pm
Looks like we need more oil now than we did in March but not as much as we July ‘08. Oil market is such an unbelievable joke.
October 23rd, 2009 at 1:33 pm
speaking of “classic”, does anyone have long term charts on crude prices? as awesome as stockcharts.com is, their records only goes back as far as this chart reflects…
if the economic recovery is “v-shaped” like some are opining how much will that spike crude, and necessarily sabotage the recovery…
was the $147 top, just a temporary high, with a correction to $35, setting up for another massive leg up? elliott wavers?
October 23rd, 2009 at 1:36 pm
I’ll be quite interested to see if/when oil decouples from the equity markets. Some of this is dollar related strength, but oil is still quite strong across the board. We’ll just have to see if they keep gobbling up the black gold in the face of equity selloff/dollar rally.
October 23rd, 2009 at 1:41 pm
This is all dollar-related. If we can go to EUR 1.60 then we can easily go to $95-100 oil. That probably corresponds to $4 gasoline. I’m thinking that would end the party long before we reached the $5 gasoline levels (in high tax states) of last year. Will they allow demand destruction to burst the bubble again or will they support the $?
October 23rd, 2009 at 1:49 pm
Singer: Speaking of charts, seems the action on the Dow over the past seven sessions, the last three in particular with stronger volume, are screaming top. If that is indeed the case, Nov/Dec could be very ugly for the indices. I added a bit more to my DXD position again today.
October 23rd, 2009 at 1:51 pm
A “joke”? Sorry, Harry. Imported commodities tell the truth about dollar debasement. They constrain the “free lunch” we’d like to give ourselves through currency devaluation. Everything *else* is a joke.
NAR/Ben/Obama/Dems/GOP/BLS, meet Mr. Crude.
October 23rd, 2009 at 1:59 pm
The joke part I am referring to is the rhetoric that accompanies the moves in oil. At $145 it was going to $300 because – take your pick – peak oil, huge demand, etc. Then at $35 it was going to $50 tops because there was no demand, peak oil was off the table, etc.
That’s why it’s a joke.
October 23rd, 2009 at 2:05 pm
I know that energy volatility is the reason that Core CPI is used as the base inflation measurement, as reported to us Sheeple. But to leave out energy just doesn’t reflect the entire picture of inflation in the US. We have so much seasonality, and such violent short term swings in energy price, that to average out inflation for a year isn’t indicative, at least to me, of the whole picture. Those of us who live in auto-dependent cities (without mass transit) live with this daily. Gas up 30 cents in the past 3 weeks here in Birmingham, AL metro. In my car, that’s a $5.00 per week increase. Not significant, I don’t suppose. But it certainly affects the price of other items, and it affects the mentality of a weak consumer as one drives down the street.
October 23rd, 2009 at 2:09 pm
Harry, okay. Understood.
October 23rd, 2009 at 2:11 pm
It’s very unlikely that that was a wave-4 decline. The 148 peak completed a major pattern. That move down was only the initial wave down of some bigger pattern. The bullish case is that we’ll get a decade’s long triangle pattern (this is the b-wave) that is a larger B-wave. When this concludes a long, long time from now, it’ll trigger a larger C-wave that will bring about serious hyperinflation…..
October 23rd, 2009 at 2:18 pm
One more thing about $148 oil…..There was no indication at that time of a bubble burst at that moment. I was fully on board with $200 oil and $5.00 gasoline in lower-tax Alabama. However, the drop from July to December overshot on the downside, and we all knew that $35.00 oil wasn’t going to hold. I’m a firm HOLD on XLE right now.
If a precipitous decline in the indices begins, and oil remains coupled, then I’ll get out…But only then…
October 23rd, 2009 at 2:25 pm
@ANDY
i agree…
i’m thinking we get some sort of big consolidation (years long) to work off the 11 to 147 move… that would be one big triangle and one big upmove afterwards…
would love to see wave count on longer term price chart….
October 23rd, 2009 at 2:26 pm
stay nimble harry…
October 23rd, 2009 at 2:28 pm
Singer: Yes, I’m staying very nimble but felt something changed a couple of days ago, that’s why I dumped my long standing AAPL position and started into DXD yesterday.
SPX 1076 seems to be a real battle ground. Would love to see your annotated chart on that.
October 23rd, 2009 at 2:30 pm
Looking at all this from a political perspective, the weak dollar policy and “QE” makes a lot of sense, at least in the short run.
But if crude oil does get to $150 by the summer of 2012, Obama may wish he had taken a different course with regard to monetary policy.
October 23rd, 2009 at 2:39 pm
stay thirsty, harry…
October 23rd, 2009 at 2:50 pm
leftback, I don’t drink much alcohol but love that ad campaign. Another one of their slogans: “You only live once. Make sure it’s enough.”
October 23rd, 2009 at 2:52 pm
@DL
Oil at 150$. No problem. $ 2,000 tax credit for gas buyers making less than 50k a year. Problem solved. Next?
ahhhhhhhhh haaaaaaaaaaaa hahaaaaaaaaa . Obama making a solid case for worse than Bush. didn’t think it was possible……..
October 23rd, 2009 at 2:58 pm
scharfy,
I hadn’t thought of the $2000 credit. But yes, Obama wouldn’t hesitate to give that out.
October 23rd, 2009 at 3:03 pm
Koreans took out HTE yesterday. Walked right up and plunked down ten bucks a share. Whats’ that tell you?
October 23rd, 2009 at 3:07 pm
Thanks to bad data from U.K, dollar is recovering today. I still own DUG. Not selling until close to $14.
October 23rd, 2009 at 3:08 pm
@Harry:
I have to agree that the oil market is a joke. No other tradeable entity can get so unhinged from fundamentals on BOTH the upside and downside. I think oil is trading on just sentiment and dollar weakness right now.
Speaking of which, our dollar: now THAT’S a joke…
Incidentally, HW, does the DXD position mean you’re off the Dow 11,500 by year end bandwagon? I have to admire your flexibility, but it does seem like you’ve been talking out of both sides of your mouth…
HCF
October 23rd, 2009 at 3:09 pm
@HCF: Almost like two different people, no?
October 23rd, 2009 at 3:21 pm
>> Obama making a solid case for worse than Bush. didn’t think it was possible……..
As one of the jurors here, I’m still mulling that over. Bush dug us into a deep, deep hole. Obama’s doing something down here. Just not whether he’s leading us to the surface…. wait… what’s that? I hear Mandarin. Downtown NY or …?
October 23rd, 2009 at 4:17 pm
@Mannwich:
He was “for it” before he was “against it” I guess =)
HCF
October 23rd, 2009 at 4:22 pm
We need $20 a gallon gasoline. That would be somewhere around $600 a barrel. (quick guess)
That doesn’t seem so far fetched these days.
October 23rd, 2009 at 4:49 pm
Best thing I’ve seen to get a true sense of where we’re going w/r/t oil depletion is from Prof. Albert Bartlett (out of U of Colorado): http://www.youtube.com/watch?v=F-QA2rkpBSY
He very clearly lays out how the impact of the exponential function affects our lives, esp. that we’re using up resources (and oil in particular) at an ever-expanding rate. There’s a total of eight videos and it takes a while to get through, but it is definitely worth it.
I originally heard of this from Jeremy Grantham at GMO, one of the smartest investors out there.
October 23rd, 2009 at 5:01 pm
@Singer,
Prechter of course has very long counts on oil, if you are interested. His prediction, during P3 oil will trade below $18 bbl.
The long counts look iffy to me, but that’s jmo.
October 23rd, 2009 at 5:24 pm
@ben22
thanks…
thing is… I don’t really see Oil as in a bear market, whereas, stocks its more plausible…
maybe if the rally from 11 to 147 is a wave 1, then wave 2 could bring us all the way back to 18… if thats the case, after the deflation passes wave 3 will be insane…
i don’t see 35 being taken out but you never know…
October 23rd, 2009 at 6:06 pm
HCF: Yes, I’m completely off the Dow going to 11,500. Two days ago I wrote on this very forum that I was selling all my AAPL at 207.5. I also talked about follow through and initiating a position in DXD. I went long DXD yesterday, a bit early but very confident in the position. I added today.
You need look no further than the chart of the Dow right now. Pull up a daily chart for three months. The strongest volume has been on down days and they’re happening with more frequency. Plus, all this “good” earnings news hasn’t done a thing to move higher. Had every chance to do so and every “justification” to make that happen. It didn’t. Don’t know if we’re exactly at our high right now but I’m sensing something very ugly in the market soon.
October 23rd, 2009 at 6:46 pm
David,
I have a hard time seeing that level on oil as well, time will tell.
October 23rd, 2009 at 9:39 pm
HW, i decided you were bullshitting us a couple of weeks ago, and lately, you have come around to sound arguments some of us (mainly ben, LB, karen, etc) have been espousing. I still don’t know if you’re bullshitting us, are a prop, or are coming around to the logical argument from exposure to us bears, but i like the debate better. I gave you props on staying long with stops and making money during the rally, and noted the inflection points along the way. Notice:
http://www.ritholtz.com/blog/2009/09/annotated-dow-update/#comment-217148
http://www.ritholtz.com/blog/2009/09/thursday-reading-2/#comment-218893
http://www.ritholtz.com/blog/2009/09/annotated-nikkei/#comment-219414
http://www.ritholtz.com/blog/2009/09/friday-reading-2/#comment-219427
http://www.ritholtz.com/blog/2009/10/readings/#comment-225943
Seems we may have more in common these days than seems. As i have said, we will, see, and hubris always comes before the fall. Prudence is in the waiting for the trend reversal. Are you going short now?
http://www.ritholtz.com/blog/2009/10/wednesday-reads-102109/#comment-228276
October 23rd, 2009 at 10:31 pm
who knows oil stocks may be the sector to hold up the market when everything else tanks. As we have learned ANYTHING can happen and oil stocks could even decouple from the price of NYMEX crude. If I’ve learned one thing recently is that rational, logical thinking is a fool’s game in the market short term.
October 24th, 2009 at 12:11 am
just to clarify, i guess i have to include CV, AT, and CN in the call
http://www.ritholtz.com/blog/2009/08/is-the-diving-dollar-driving-equities/#comment-200593
October 25th, 2009 at 12:43 am
Mr Singer:
a) What does the oil chart look if it is plotted in $euro? would it flatten? or, if oil and$ euro are charted together, would they parallel ?
b) the S&P chart, are we forming the right shoulder of an H&S? I ‘was’ predicting the S&P topping at 1140 (a 61.8% retracement from 667 on March 9) but now I wonder if we just topped out
“may you live in interesting times”
October 25th, 2009 at 12:56 am
Oil
are we in a 4th or 5th elliot wave?
OR was the ‘wave 3′ an “X” wave(abc)? if so are we now in an b wave of an abc down?