OPEC will follow Iran. The United States has fallen out of favor in the Middle East and Iran seems to be the only country in the region who can swing things. Iran can stop the terrorism in Iraq if they wanted. As well, if OPEC rallies behind Iran by way of press release then that will send the oil markets soaring.
I did not take the removal of the Saudi Ambassador right before this weekend as a positive sign. That tells me the Saudis are not in bed with the US on this issue. The Saudis will not support such sanctions as they have more to gain by being buddies with Iran then enemies.
France will always support Iran and they will continue to do so. They have a certain under the table relationship with each other. China and the Russians will always support Iran as well. The Russians especially cannot afford not to otherwise they will further inflame the Muslim fundamentalists in their own country.
I cant point out many friends of the US in the Middle East besides Israel. Nuclear weapons is not a big deal in that region of the world. Israel has them, India has them, Pakistan has them, etc. Bush wants to make it a big deal.
The Iranians believe it is there right to have nuclear power and its a source of pride for all. The politicians in Iran cannot go back on their word to the people without serious repercussions. They wont back down. George wont back down either.
So you have Iran very angry and turning off the tap. You have the other OPEC nations following Iran because no one wants to disturb the mafia (which is Iran). Why would you want to bring insurgents and car bombs down on your country?
Give the Euro six months and it will be right around $1.20 and the reasons I site are the following:
- Ben Bernanke knows its his job to defend the dollar and he will do so.
- Chart tells me that Euro is at the top of its range and will fall back down the sideways channel it has traded in the last two years. This isnt the first time in two years that its been this high.
- Too much bullish sentiment that the Euro will go even higher. Nothing goes up with a parade of bullish sentiment, well, almost nothing. I prefer to see some bearishness and I dont see it which is a contrarian indicator at least to me.
Natural gas is not falling of a cliff. It has traded in a sideways channel since October of 2005. No one on CNBC seems to want to bring up the charts to demonstrate that fact to anyone. It has made about 4 round trips from the 430ish to 370ish level.
Now we dont call that falling off a cliff, we call that consolidation. The rise in natural gas started in January 2004 and then continued on to October 2005 where it has been consolidating until right now. In the last few months, the channel has been making higher highs and higher lows meaning that it will fall back down to the 50 week moving average and then most likely break out from there. Where it goes from there is anyone's guess? I do know however that it will continue to go up whether the channel run up or it breaks out to the next channel.
The last tops were 439, 452, 476. The last lows were 377, 378 and 390. A pattern is forming here.
The Nasdaq is going to correct 10% probably right after the New Year, but surely by May. I dont see where any of the nasdaq stocks have made any decent correction. In reviewing the historical valuations and P/E ratios, most of these naz stocks are way overvalued. Way overvalued. They are nowhere near decent.
The reason is because of oil and Bernanke actually. Back in June, Bernanke did not raise the rates and now everyone believes that he will cut rates. The market ran up on the assumption he will cut rates. In fact, he is going to raise rates. He doesnt care about the market. His interest is in defending the dollar.
As well, the S&P500 ramped up because of the bearishness in energy prices. Those S&P500 companies benefit greatly from lower energy prices. I had noticed about a year ago that all of the indexes had started to follow the S&P500. If oil goes up, then the S&P500 will go down and the rest of the stocks will follow.
You cant make excuses for a historical indicator that has been almost 100% right. The one time it was wrong had circumstances behind it.
As for the jobs, they are about to suffer very badly. When do you think companies start laying off people? In fact, all I read about is about Ford, Intel, GM, etc laying off people. The end of the year is the time for company wide layoffs. The jobs will suffer soon enough.
I have pulled my longs off yes and am making excellent money on my short positions. I know what I said in the past about how I dislike shorting stocks, but this time things cannot be any clearer to myself. These stocks are way overvalued. The chart is telling me that the market will fall and the VTI is getting awfully close to the 50-day. All it has to do is take one or two more steps for a full correction which is right now past due.
6 months ago I was very bearish on the oil and energy industry and very bullish on the tech industry. Energy was going beyond fundamentals. Now it cant be any clearer to myself what is about to take place.
I actually sold off all my techs in November then longed my small cap drillers along with a few others in the basket. I have shorted Apple, RIMM and quite a few others.
I feel like its May again. The same factors exist now as they did back in May only the picture is much worse this time around. Conflict with Iran is now more likely then ever before. The margin interest built up in the market is even higher then it was back then.
The demand for off-shore oil is at the highest its ever been. I called up Caldive DVR and they are booked solid for the next 6 months. Transocean says it has no more rigs, all booked and building more.
So right now we have a bunch of bulls believing in overvalued tech with no fundamentals and a bunch of bears not beliving in energy which has all the fundamentals in the world. What do you think is the next step from here?
Quote from scriabinop23:
I think you'll do better long the euro through this. its already come back a little (in mid 1.31 area) from its recent rampup.
oil and energy sector has two things going against it: weather, weather. furthermore, Iran cutting off oil supplies will likely mean the rest of opec compensating by adding more supply, which they definitely have enough of at the moment to offset lost Iran exports. remember they don't want economic slowdown.
If this would've happened 6 months ago, at the height of hurricane season, I would've agreed about your doom and gloom view.. but its not 6 months ago. natural gas is about the fall off the cliff and act as a big drag to the energy sector.
furthermore, be careful to short many of those nasdaq stocks right now. they've already corrected from their runup and their valuations are actually -decent-.
furthermore, i've thought about our previous discussions as slow domestic auto sales being a harbinger to difficult times ahead, and my response is this: Toyota. this is a misleading indicator as a whole.
don't pull your longs off until jobs start really suffering, which they are not.
