Ok, here is the short version:
Arabs- They have too much invested in development. 25% of the worlds 125000 cranes are there right now. They cant let oil fall any lower or risk default on development loans. They spend 62 million an hour on cranes alone.
Bernanke- He wants to control inflation, but inflation is clearly driven by oil prices. He doesnt see it that way however so he is going to raise rates to control inflation.
Oil- Short term factors had driven down the price over the summer like the election, hedge funds unwinding position and a lack of hurricanes. Short term factors are now over and Arabs have an interest in raising oil prices.
S&P500/DJIA- They both have an inverse relationship with the price of oil. As oil goes down, these two indexes go up. Many other indexes loosely track with the DJIA/SP. As oil goes back up, these two indexes will go down and other indexes will follow along.
Small caps growth- These stocks are not driven by energy prices, but they are driven by interest rates and liquidity. As oil goes up again, inflation goes up and Bernanke raises rates or keeps them where they are at. Some small cap growth had come back from the summer until now and that is because they were betting that interest rates would be lowered next year. I dont see how they could be lowered at this point, I do see an argument for them being raised.
Consumer Staples&Defensive stocks- Bid up too high and are also effected by the price of oil. As oil goes up, these will be hit too.
In conclusion, market may trend higher for a few more months, but will undergo a dramatic 10% correction eventually. Nasdaq stocks will be hit even harder, possibly 20% or more.
All of the above that I stated, everyone knows all this. In January, most people will sell their positions because of the possible coming storm. That will be the first area of weakness. The reason why they dont sell right now is for tax reasons.
The only possible avenues I see are
1) Go short or puts
2) Go into cash
3) Look at stocks that have been sold off right now for tax reasons such as Earthlink and go long at start of January.
4) Ride up the positive momentum for a few more months until shorting. That is, if there is positive momentum.
5) Look at loosely traded OTC stocks for possible longs that no one pays attention to. I like Praetorians recent OTC picks such as HEMA.
Arabs- They have too much invested in development. 25% of the worlds 125000 cranes are there right now. They cant let oil fall any lower or risk default on development loans. They spend 62 million an hour on cranes alone.
Bernanke- He wants to control inflation, but inflation is clearly driven by oil prices. He doesnt see it that way however so he is going to raise rates to control inflation.
Oil- Short term factors had driven down the price over the summer like the election, hedge funds unwinding position and a lack of hurricanes. Short term factors are now over and Arabs have an interest in raising oil prices.
S&P500/DJIA- They both have an inverse relationship with the price of oil. As oil goes down, these two indexes go up. Many other indexes loosely track with the DJIA/SP. As oil goes back up, these two indexes will go down and other indexes will follow along.
Small caps growth- These stocks are not driven by energy prices, but they are driven by interest rates and liquidity. As oil goes up again, inflation goes up and Bernanke raises rates or keeps them where they are at. Some small cap growth had come back from the summer until now and that is because they were betting that interest rates would be lowered next year. I dont see how they could be lowered at this point, I do see an argument for them being raised.
Consumer Staples&Defensive stocks- Bid up too high and are also effected by the price of oil. As oil goes up, these will be hit too.
In conclusion, market may trend higher for a few more months, but will undergo a dramatic 10% correction eventually. Nasdaq stocks will be hit even harder, possibly 20% or more.
All of the above that I stated, everyone knows all this. In January, most people will sell their positions because of the possible coming storm. That will be the first area of weakness. The reason why they dont sell right now is for tax reasons.
The only possible avenues I see are
1) Go short or puts
2) Go into cash
3) Look at stocks that have been sold off right now for tax reasons such as Earthlink and go long at start of January.
4) Ride up the positive momentum for a few more months until shorting. That is, if there is positive momentum.
5) Look at loosely traded OTC stocks for possible longs that no one pays attention to. I like Praetorians recent OTC picks such as HEMA.