With market fully focused on Oil prices and overall market starting to breakdown technically, only real plays out there are energy plays...traders piling into small cap names especially those which were big runners back in 2008 when Oil ran to $147/barrel...names like PDO ROYL MXC FPP BDCO, essentially any company with the world Oil or Energy in its name is seeing a bid, and should Oil continue to push higher these names have potential for parabolic moves similar to what we saw back in 2008
APRIL 1, 2010
5:49PM ESTGlobal Darwinian Forces Point To World War Predicated On Crude Oil SuppliesWe as mere individuals, will never understand the desire to become a global superpower. This desire is something reserved for continents, nations, and unions as it is impossible for us as mere individuals to achieve such status. However, even though we may not have the capacity to understand this desire, we know that it exists. We know that every single day every sovereign nation is actively working or has the innate desire to become the strongest entity in the world. Why does this happen? What is the driving force behind this phenomenon? In my opinion it is driven by the underlying principle that the world lacks enough supply of natural resources to prolong the existence of every single nation over the long run. Over time, as the world begins to approach levels where natural resources are being fiercely competed over because of inadequate supplies and/or unusually high global demand at the margin, the strongest nations will attempt to force weaker nations into further weakness in the hope that this action may curtail overall demand and allow the strongest nations to accumulate necessary supplies at cheaper prices. It is Darwinism at its purest, and it is ultimately driven by the idea that while economic harmony may exist when the strongest parties are satisfied with the distribution of goods and resources, extreme competitive behavior will arise when those parties become dissatisfied with the allocation of resources, especially those resources necessary for independent survival. It is very much akin to the behavior of animals living in a jungle free from the so-called orders of society. When all animals including the strongest are fed and all so-called entities appear satisfied, harmony may exist because there is no need for competition as supplies of resources are adequate enough to meet the demands of all entities. However, if/when the strongest entities become dissatisfied with their levels of consumption, we will likely see an extreme uptick in competitive behavior as the idea of the natural order for satisfaction dictates that the strongest must be first to be completely satisfied. If/when this natural order appears to be imbalanced in that the strongest are not receiving adequate supplies, the strongest entities will likely seek to not only eliminate those entities which they believe will restore natural balance, but they will specifically seek to eliminate those who they believe will be easiest to eliminate (i.e. those entities who appear weakest). So what resource are we speaking of specifically when we speak of resources necessary for survival? We are speaking of crude Oil. Every single other commodity is secondary to crude oil in terms of necessity for survival. Gold, corn, wheat, coal, even steel are all secondary commodities. We don't need corn or even grain to survive, and coal and other fossil fuels are simply alternatives to the most important fossil fuel of all, crude oil. Without crude oil, factories would come to a stand still, refineries would be unable to produce gasoline, airplanes would be grounded, heating oil would be unable to be produced, and ultimately unemployment would skyrocket as productive inputs are unable to function and means of transportation become idle. It is the reason why there is literally no limit to how high the price of oil can go over the long run. Its significance as the world's primary energy source produces wars, wreaks havoc within the economic supply chain, and has the capacity to bring entire nations to its knees.
DECEMBER 15, 2010
1:39PM ESTCovered half TLT short here in $90.80s from $104.20, sold half TBT long $40.20s from $31.76 for significant gains (both positions initiated October 5th when we outlined our Q4 2010 Meltup Thesis in equities - see October 5th - 12:33PM entry)....one of our best trades this year, have to take some off the table at these levels
1:57PM ESTCovered last half of TLT short at $91.04/ TBT long at $40.07, full profits taken on this Treasury position...may even get long here shortly
DECEMBER 16, 2010
2:39PM ESTJust took low risk/high reward position in December 39 TBT puts at .06....note these contracts expire tomorrow, willing to risk .06 on possible +$1.00 payout on Treasury surge...oversold technicals in addition to possible bearish news for equities signaled by Dec SPY call activity shows high probability for big move to the upside in Treasuries here near-term...also note Monday gap at $38.06 which is likely target on a momentum shift to the downside in TBT (gap at $93.50 on TLT)
DECEMBER 17, 2010
10:27AM ESTNice bounce in Treasuries this morning with TBT hovering just above $39 putting our December 39 TBT puts very close to trading in the money here (already +200% from .06 entry yesterday)...due to oversold technicals, heavy shorts in Treasuries no reason we cant see a spike to $93s in TLT today (Monday gap at $93.50) which would send our puts soaring...holding onto entire TBT put position here as we're willing to risk the .06 loss on the options for above average probability of .95 payout on TLT spike
2:27PM EST
All out December 39 TBT Puts at $1.01-1.05 from .06 entry yesterday for a grand slam overnight profit of 1,600% as $93.50 gap fill target put out yesterday on TLT hit to perfection (see Dec. 16th - 2:39PM entry)....we will continue to hold our long TLT position taken at $91.14 wednesday, along with our TBT short position initiated at $40 as we believe Treasuries have hit a short-term bottom
NOVEMBER 29, 2010
1:48PM ESTStepping back and taking a broadbased view of equities we can see continued signs of underlying strength as financials continue to trade green (very strong sign that US-based equities are somewhat isolated from European sovereign debt concerns), high-beta retail names AMZN and AAPL continue to outperform, and Oil Services names continue to see a strong bid...again, no real single sector leading us down, just some broadbased mild risk reduction taking place likely due to blackboxes reacting to dollar strength and overseas weakness...as noted however we continue to view underlying strength in market leaders tech and retail as a signal that these markets are not ready to turnover just yet and are likely to continue to push higher near-term on the back of strength in these two sectors...given trading action thus far expect we're likely to see a strong push higher heading into the close today and/or another strong snapback rally tomorrow...one important aspect to take note of is the fact that US equities have dealt with very significant headlines over the past couple of weeks (China tightening headlines, European sovereign debt headlines, strong dollar rally, etc.), yet the market continues to hover within striking distance of its recent highs with many leadership stocks (AAPL AMZN) trading at or near new highs...this inability of the market to turnover on a significant confluence of negative headwinds not only dictates massive underlying strength (which will ultimately force shorts to cover) but it also produces an environment with reduced headline risk and weaker selling pressure going forward and one highly conducive to rapidly rising stock prices (big negative headlines which had produced high levels of uncertainty now out of the way and risk levels have already been reduced due to extremely negative headlines)...watch for any marginally positive global headlines and/or weaker dollar to send this market higher near-term as supply/demand profile of market now favoring higher prices (weak supply levels due to reduced levels of required risk reduction/high demand due to short covering and further conviction on long side due to shallow pullback realtive to extremely negative headlines)
10:06AM ESTAdded to SPY position at $117.80 as S&P should hold its 50-day EMA here at 1174.37...believe retail thesis is still in tact, haven't unloaded a single position into this weakness...believe we have another retail/tech-led squeeze coming this week as shorts surely taking positions into this sell-off and will likely get squeezed this week...expect bounce off 50-day EMA on S&P will bring in technical buy interest as well...European market clearly leading the way lower as it trades down 2.3% now, however continue to believe their sovereign debt issues are mostly isolated to Europe (note US bank stocks GS JPM MS C BAC trading flat to green this morning) and will have little effect on retail spending here in the US...selling pressure strictly coming from blackboxes tied to dollar/overseas indices, however expect underlying theme of consumer spending momentum into year-end to override these concerns near-term
NOVEMBER 30, 2010
3:49PM ESTBig moves across all financial markets today making data rather noisy: Euro -1%, Gold +1%, Oil -1.75%, VIX +7%, Treasuries + 1% earlier, Nasdaq -1%....big standout though is this very big buyer taking in heavy supply in SPYs all day, typically it signals a big up move coming in equities which coincides with technical formation off possible triple bottom on S&P...from what we're seeing we believe we have potential to see a very strong rally off this 1175 level here near-term
2:41PM ESTBuy pressure in SPYs on pullbacks shows very strong accumulation going on likely ahead of a strong up day tomorrow...also high betas held up very well on this pullback over the past 15 minutes...solid triple bottom on the S&P chart at 1175, feels like we're set up for a strong push higher off these levels likely back into 1190s and then onto 1200-1210....big accumulation going on in SPYs
12:33PM ESTColor On Q4 2010 Meltup ThesisS&P breaking out past 1157 on continued short-covering + Fed liquidity injection through POMO....high betas continue to outperform with BIDU now up over 5%...started initiating short position in bonds going long TBT at $31.76 (Ultrashort Bonds) and short TLT $104.20 as we believe this bond trade is getting ready to unwind significantly over the next several weeks as funds swap out of low-risk assets in favor of higher risk equities and the Fed's second QE package is much smaller than current market expectations...in terms of equities, tons of shorts now trapped in high beta positions after todays gap up, and we have funds who are still extremely underexposed to equities and now extremely nervous as they watch this market take off without them....this is one of the main pillars of our Q4 Meltup Thesis (which we'll be presenting in a video here shortly) that there is still an enormous amount of fund demand which needs to be met ahead of year end especially as markets breakout over major technical levels...remember this is the last quarter of the year, fund managers no longer have the luxury of time to wait and see if rallies are for real or not, there are merely 11 weeks left for funds to produce performance numbers and then the books are closed, statements are sent out, and clients make decisions on whether or not their money was managed well or not...if they believe it hasn't, the money likely moves to a fund which did produce sufficient results, and that manager who was unable to produce heads to the unemployment line...moreover, the smartest money in the market (ie Goldman Sachs) is well aware of this constraint of time and are now certain that if they break markets out over technical levels there will surely be fund buyers willing to buy at those higher prices....this is how many of the most aggressive funds operate..."if we carry out Action A, how certain are we that Outcome B will occur?"...in other words, if we push the S&P past 1157, how certain are we that there will be enough buyers or capital to propel the market to 1175?....its a big game of exploiting your opponents weaknesses and constraints and being able to anticipate your opponents reactions....furthermore, this move to propel markets higher is also in line with the Feds desire to create inflation, create wealth, and create the perception of improved economic conditions heading into a very important holiday season where it is imperative that consumers spend as much money as possible...lastly we believe the November 2nd Congressional Elections results in addition to the FOMC meeting on November 3rd will act as a major pivot point for markets as the looming cloud of Congressional uncertainty passes and the FOMC likely provides further accommodative commentary to propel markets higher...in terms of the Congressional elections the only possible negative outcome would be the Dems controlling both the House and Senate which we view as extremely unlikely...we will be providing more color on our Q4 Meltup Thesis in a video this week, but in the mean time we recommend maintaining a strong long bias, accumulating positions on dips, and we'd be looking at way out of the money December calls on high beta names as well as the indices while looking to short Treasuries
In September Of 2010 we accumulated a basket of 6 Small Cap Stocks REDF KNDI LOCM TZOO REE MMYT we believed would be manipulated by Hedge Funds in order to boost 3rd Quarter and Year-End performance numbers - over the course of the next 8 weeks every single stock soared with REDF exploding +92% From Our Entry, KNDI +122%, REE +135%, RTK +79%, TZOO +78%, LOCM +47% and MMYT +30%
click here for specific write-upsGold To Replicate Oil's Parabolic Move, 30-Year Treasury Yields To SoarWith multiple bank failures looming and the US government doing nothing but take on bad debt and assets onto their balance sheet we are looking for new lows in the US dollar as the fundamental backdrop of the US financial system continues to worsen by the day. Inflationary pressures continue to mount with Oil and food hovering near their all-time highs, and the US continues to be hardest hit with respect to inflation due to the high cost of imports based on the declining purchasing power of the dollar. Note that while Europe for example has to pay the same $145 for a barrel of Oil that we do, their currency has also appreciated almost 20% since last year thereby mitigating some of their inflationary pressure. Furthermore, with the US posting its sixth straight month of job losses in June, and the employment picture getting seemingly worse by the day, you can expect the unemployment rate to start ticking up toward 6% by year end. Take into consideration that these looming bank failures will definitely lead to large job losses in financial services in addition to layoffs recently announced within the energy-sensitive transportation sector i.e. airlines and car companies like GM....
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