Tuesday, December 16, 2014

Russia and Oil Fears

Who cares about the ruble?  Liquidation doesn't care.  Margin clerks just liquidate based on price, not reason.  Russia is getting crushed, along with the ruble, and now there are fears that it will crumble the S&P.  We are in a time period where liquidity is starting to thin out ahead of the holiday, and traders want to reduce risk before Christmas and year end.
The much touted Santa Rally will have to wait, at least for a bit longer.  I am liking these levels to get long, and will be buying the fear at the open.  It is almost standard now.  Gap down big on exogenous events and squeeze higher at the open when the US traders come into battle.

Europe has been getting crushed lately, perhaps due to those Russian fears, but if the fears are irrational, which I believe them to be, this is a time to buy.  There will be volatility today, and there is no real solid support now till you get to SPX 1960 to 1965, 1980 was support but we're trading below that in pre market as the futures are getting whacked.  ES 1953 to 1958 are your absolute puke out levels to watch for today.

Treasuries are doing a October 15 rehash as the market volatility goes to a higher level.  Treasuries look toppy to me, and this could be the capitulation.

I am a buyer of stocks today.  It is buy and just hang on tight.  This roller coaster ride is almost coming to an end.


Anonymous said...

I've been playing with PBR and getting burned but switched over to SN and BAS just two days ago with options and margin.

I never believed in the oil to $40 prediction. In 2009 it was serious recession and there is dollar devaluation to consider and a previous low is not always the benchmark 5 years later.

In respect of the crude oil show I rented There Will Be Blood. Definitely an interesting movie for sure.

Market Owl said...

I have also been quite surprised at the vicious down move in crude oil. Like you, I don't believe that we will go to $40 unless we get another deep recession, which is possible but not likely.

However, I don't like the way crude oil has been trading, going lower and lower and each rally being sold immediately. Perhaps we have hit bottom here, but I would rather short a bounce than try to pick a bottom.

I don't trade oil stocks, but I wouldn't touch them here because December is tax loss selling season. I think they could bounce in January however.

Anonymous said...

Tax loss selling is done in my opinion for some of these thrown in the trash small cap oil drillers. You don't have stocks trade 200% of their float in the last month and account only for short sellers. This crude oil show is not as large in magnitude as the 2009 666 dip but I wouldn't be surprised if we see 50% retracements in many stocks that have gone down 75% or more.

It's crazy. What took the world so long to figure out that US shale drilling increased supply so much to make oil drop 50%. There's a big disconnect between price and fundamental. Oil is like gold IMO. There is a finite amount and it's getting more expensive by time to acquire it. The difference is that oil is necessary.

Market Owl said...

I do think the market will go higher from here, that should help all stocks, including oil names.

50% retracement for these dumpers is out of the question. Be happy with a 10-15% bounce and get the hell out of those names.

Anonymous said...

2030 on the SPX and 65 on WTI and I will consider exiting my positions and not until then. These targets I expect will be met in the last days of December. 2015 will be a flat to down, albeit volatile year IMO. Economy and economy has run out of excuses to expand

Anonymous said...

Economy and market.

Market Owl said...

There is no way we are getting to $65 on WTI by the end of the year. This sucker will be lucky to get back up to $60. We are already dropping on oil $3 off the top today! We are not going to $65. Dump these oil stocks on an S&P rally, regardless of oil prices.

Anonymous said...

The paradigm has shifted. The ball is now on the other side of the court away from the sellers. The time to act like a chicken shit is behind us now. Sit tight and breathe in the gains. The money is in the waiting!

Market Owl said...

You are right, the market is breathing in the gains! No one wants to miss the bottom. We are going to new all time highs!