Gold, oil, and the ⬠near a top
- Thread starter Cutten
- Start date
well he said that i said something smart, which in itself is a smart thing to say.
This wasn't a senior leader who said this from what I gather. He was a third tier advisor, and he quickly qualified his statement with a 180 turn after he said it. Typical chinese saber rattling. It is AMAZING how something like this turns into "news" for some folks. Didn't you ever play that game "telephone" when you were a kid?
Everyone sat around a table and one person whispered into the kid's ear next to him something like "red school house" and by the time it went around the table, the phrase was "I saw a mouse"?
Same thing we have here with this crappy news reporting.
Cutten. The question is when will the Fed realize they have a trading desk in the basement? remember Rubin he only had to do it twice, well timed moves that sent a message that the trade is two sided. I think after tues we may see a big decline in oil and the beginnings of such gov intervention. ~ stoney
a crash in china would send the dow and pretty much everything else down.
Update:
I have become very bearish on oil, and am mildly bearish on gold & the Euro. I think oil will go below $70 within the next 3-4 months. Gold and Euro are less clear but I am long a few puts as a conservative bet on further declines.
My reasoning on oil is as follows:
i) it had a 100% rally in 10 months (this alone is not bearish but it does create the potential for a hefty correction should the trend turn)
ii) it reached, but failed to penetrate, a critical psychological price level ($100). This occured despite it twice rallying hard up to that level.
iii) there is a huge preponderance of speculative longs in the market, and sentiment has been overwhelmingly bullish, expecting the $100 level to be breached. Clueless noobs like Hugo Chavez and that Iranian president have started bragging about being oil bulls.
iv) fundamentals outlook is cloudy - the US is in economic trouble and may even have a recession, a fairly bearish development
All these give good potential for a decline, but don't provide a catalyst. My timing factor, which did not exist until recently, is that the price/news/sentiment action in the last 2 weeks has become increasingly bearish. Firstly you had the classic double top just below $100. To get so close - twice - to that critical, widely focused on number, yet to be unable to penetrate it even by 1 cent, was surprising. Second, you had the reaction to the pipeline explosion last week - a one-day bounce, which within 48 hours had traded right back down and then went to new lows within a few days. Normally that kind of event would have sent oil up $10+ within a week. Occuring at around $91-92, oil should have broken $100 on that kind of bullish news. Instead it is now trading below $87 as I type. You had the same thing on smaller scale this week, when OPEC made mildly bullish noises on supply, the price went up a bit but the next day turned back down and the day after went to new lows. This kind of failure to sustain a rally on bullish news - and then falling to new lows - is *very* bearish action. Finally, oil broke to a new low, breaching the $89 level (the low of the previous correction from 98) fairly convincingly.
So to me oil looks pretty darn bearish. I think we will fall to $70 and maybe a bit below, and it won't take too long, maybe 3-4 months. Worst case it could hit $50 but I think that is unlikely (<5% chance) as it was the prior low of the current bull run. More likely is a 50-60% correction of the entire $50 rally this year, which would imply a $25-30 fall from the highs - from $99 that would be $69-74. $68-69 was a prior support low on the up move this year, so that is my price target. That being said, I think the best guide to when to cover shorts will be sentiment. You want to see extreme price weakness, front page headlines in the business press, heavily bearish sentiment with oil bulls giving up, and airtime given to people making predictions of the price falling below $50, saying the secular bull run is over. That would make me stop being bearish.
Gold and the Euro have not acted anywhere near as bad, however they are related trades and so I expect them to be a bit weak if oil goes down that far. I would imagine gold and Euro falling maybe 10% from current price levels.
As for risk - a $4-5 bounce in oil could happen at any time and wouldn't surprise me. I'd either stay short or increase my position if that happened. But any rally should not go much more than that. $92-93 should be pretty much the extent of it, and would IMO be a very appealing place to short more or load up on some 3 month puts. A move above those levels would mean I am increasingly likely to be wrong, and a move above say $95-96 would get me out of the position.
I have become very bearish on oil, and am mildly bearish on gold & the Euro. I think oil will go below $70 within the next 3-4 months. Gold and Euro are less clear but I am long a few puts as a conservative bet on further declines.
My reasoning on oil is as follows:
i) it had a 100% rally in 10 months (this alone is not bearish but it does create the potential for a hefty correction should the trend turn)
ii) it reached, but failed to penetrate, a critical psychological price level ($100). This occured despite it twice rallying hard up to that level.
iii) there is a huge preponderance of speculative longs in the market, and sentiment has been overwhelmingly bullish, expecting the $100 level to be breached. Clueless noobs like Hugo Chavez and that Iranian president have started bragging about being oil bulls.
iv) fundamentals outlook is cloudy - the US is in economic trouble and may even have a recession, a fairly bearish development
All these give good potential for a decline, but don't provide a catalyst. My timing factor, which did not exist until recently, is that the price/news/sentiment action in the last 2 weeks has become increasingly bearish. Firstly you had the classic double top just below $100. To get so close - twice - to that critical, widely focused on number, yet to be unable to penetrate it even by 1 cent, was surprising. Second, you had the reaction to the pipeline explosion last week - a one-day bounce, which within 48 hours had traded right back down and then went to new lows within a few days. Normally that kind of event would have sent oil up $10+ within a week. Occuring at around $91-92, oil should have broken $100 on that kind of bullish news. Instead it is now trading below $87 as I type. You had the same thing on smaller scale this week, when OPEC made mildly bullish noises on supply, the price went up a bit but the next day turned back down and the day after went to new lows. This kind of failure to sustain a rally on bullish news - and then falling to new lows - is *very* bearish action. Finally, oil broke to a new low, breaching the $89 level (the low of the previous correction from 98) fairly convincingly.
So to me oil looks pretty darn bearish. I think we will fall to $70 and maybe a bit below, and it won't take too long, maybe 3-4 months. Worst case it could hit $50 but I think that is unlikely (<5% chance) as it was the prior low of the current bull run. More likely is a 50-60% correction of the entire $50 rally this year, which would imply a $25-30 fall from the highs - from $99 that would be $69-74. $68-69 was a prior support low on the up move this year, so that is my price target. That being said, I think the best guide to when to cover shorts will be sentiment. You want to see extreme price weakness, front page headlines in the business press, heavily bearish sentiment with oil bulls giving up, and airtime given to people making predictions of the price falling below $50, saying the secular bull run is over. That would make me stop being bearish.
Gold and the Euro have not acted anywhere near as bad, however they are related trades and so I expect them to be a bit weak if oil goes down that far. I would imagine gold and Euro falling maybe 10% from current price levels.
As for risk - a $4-5 bounce in oil could happen at any time and wouldn't surprise me. I'd either stay short or increase my position if that happened. But any rally should not go much more than that. $92-93 should be pretty much the extent of it, and would IMO be a very appealing place to short more or load up on some 3 month puts. A move above those levels would mean I am increasingly likely to be wrong, and a move above say $95-96 would get me out of the position.