Newscasters are funny people. OK. Not that funny.
Oil prices for the last month or so have been stagnant trading within a sideways trading range.
DIDN'T KNOW THAT?
All you hear is rising oil prices. They haven't been rising. They go up. News is drastic. Prices went up 3 dollars. Then they go down 5. Silence. Then they go up 4 dollars. Largest price rise in a month. (same territory)
Then they go down. More silence.
So between 130 and 140 the price bounces back and forth. Goes up, big headlines. Goes down, Silence. This sideways movement which doesn't merit much headline also tends to feed pessimism and fear. That translates to the market.
Now as a trader I'm asking myself this question. What does this mean for me? What is the outcome of this kind of back and forth? When markets trade sideways for a long time like this it means 3 things. One is all the bad news is in. Even if something bad happens (Nigeria blows a fuse) the upward potential is little or none.
It means that trader sentiment to take it to 150 or 175 is not there without some catastrophe. War in Iran perhaps. And that would be short lived.
It also means that there is a building vulnerability to a downward move. There is a top, strong resistance. It can't break out. The speculative pressure is dying off. The longs are no longer being rewarded for being long. It was easy a while back, buy and hold. Now no more return. So if you are a long you are holding a position you wouldn't take if you didn't already have it. If you are a short you are nervous too but with every passing day you become a little less nervous. Things are looking better.
It only takes a little good news, a little production bump, a little trend changing reaction and this thing will get weak fast.
50-70 dollars.
The politicians are all in uproar. And the genius Obama is going to FIX this by dealing with the speculators. I wish someone would give him a basic lesson in economics. The speculators take the risk out of the market. I won't go into that here.
That's the fear I have of the liberals taking over in the fall. Just look at the congress, house and senate. The leadership are tone deaf ignoramuses without a clue as to how economics, supply, demand and trading curves work. Pelosi, Reed and all the rest are just plain stupid.
Now in fairness, the republicans aren't much better. I think we find really stupid people and then send them to Washington. There should be an economic literacy test given before you can take the oath of office to any political position.
Look at Maxine Waters. How dumb can you be and still breathe.
So, the market works, it actually works well. It's laying a bear trap. I thought it would snap before this. But it will SNAP!
2 comments:
Just a question, perhaps the most basic question. At this point in time, today, not yesterday or the future, is oil a necessity or just another commodity? If it's the former, then how can it be treated as a commodity open to hoarding and speculation?
The fact that is a necessity makes it even MORE important to be treated as s commodity. That the market can set the price and not some artificial political craziness.
To hoard means there must be a reward. If there is no reward there will be no hoard. That's the nature of speculation.
If I think green rocks are in short supply and gather up all the green rocks. Then someone down the street shows up with a huge supply I'm left holding the green rock bag.
That's where the Longs are right now (those that believe the price is headed straight up). If the bet is wrong (and it is) they will be left holding the bag and in the end be profitable as they lose money to people on the SHORT side of the market.
It's what makes a horse race.
I have a question, what necessity has ever benefited from intervention at any level by government. Short term sure, long term never. In the end, Adam Smith wins.
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