Our friends at 1440 Wall Street posted some solid logic today from Pimco’s El-Erian today regarding when it’s smart to buy either the debt or equity of companies in an industry that’s recapitalizing rather than expanding. Umm, kind of like where the financial sector finds itself today.
My just-posted bullish posture (sentiment-wise) in Crude Oil is balanced by a textbook sell signal on the Daily chart.
The Oil ETF (USO) reflects futures markets, which both have just experienced an upside move outside the 4-month uptrending channel. In short, it looks euphoric and ripe for a pullback if not all-out top. FWIW this is one of Bill O’Neill’s (of IBD fame) classic sell signals.
So, it’s price action versus “bubble-babble” sentiment. Winner will only be known in hindsight, but should be very interesting until then..
Using history as a guide, this spike in Oil prices will likely not burst while so many people — frustrated from previously wrong calls of a top at $80, $90, $100, etc — continue calling it a “bubble.”
The absolute peaks of moves like this typically aren’t reached until even the bubble-callers give up, get quiet, and (silently?) buy into the trend itself. Only then does the move end. Markets are truly perverse like that.
With such pervasive bubble-talk, Teewinot thinks it’s foolish to call the top in Oil here. We are actively pursuing energy names such as Ensco (ESV), Varco (NOV), and Frontier (FTO). BPT and PBT are royalty trusts that also sit prominently on our radar screen.
If we’re wrong.. small losses are the worst outcome.. since we’re buying into multi-day pullbacks, and are willing to cut ties on any meaningful price failures. These are definitely odds that we like.
Everyone thinks oil is in bubble territory. It’s easy to agree. But for just that reason.. for now.. we must remain biased toward the upside in this sector.
We’ve locked in pretty solid gains for the month of May. With Monday’s holiday and likely slow trading, it’s time to take a breather and give the market an opportunity to show its hand.
Time for some humor that just never gets old.. a hilarious Jim Cramer impersonation:
It sometimes pays well, but is a tough line of work.
One of my core tenets is to never, absoulutely never, let one individual trade or transaction impair our capital to a degree we can’t recover from quickly. Opportunity comes around far too often to cling to losing positions very long.
While preferable with a beautiful and personable girlfriend, there’s absolutely no need load up and marry any of your stock ideas.
Stocks rallying on bad news is not remotely uncommon. It’s usually the result of portfolio managers using a “well that was bad but surely the worst is over” rationale.
The market’s real enemy is uncertainty. And that’s what it got in spades, with today’s news that the SEC is now forcing Wall Street banks to reveal more information about their capital positions and liquidity levels.
My prediction: the term “level 3 assets” will enter Joe Sixpack’s vocabulary before all this is over.
After gapping up at the open, the market sold off mid-morning on rumors of US Navy contractors firing on Iranian gunboats (story was later refuted). As of the lunch hour, we’re back to flatline.
I remain in a bullish mindset for two reasons. First and foremost, there are lots of great looking individual stock charts available — far more than anytime since last Sept-Oct. Second, the indexes keep chopping away at their key resistance levels: 139.50 for SPY and 72 for IWM. Those levels also represent a 50% retracement of all losses since the December 26th top (”Merry Christmas!”). To gain back more than half of those horrendous losses on a closing basis should provide a very tradeable rally and strong gains in the most solid stocks.
This wouldn’t necessarily the mean the bear market is over. But.. the “long term” is merely a collection of a vast number of “short terms.” Every one counts.
The past few weeks have produced a variety of chart setups that represent solid opportunities. Itron (ITRI) is one that we bought shares in today.
ITRI’s stock price just launched above $100 for the first time in months. We are looking to make several dollars per share from the trade in less than a week, as ITRI announces earnings on April 30th after market close. We’ll be either fully or nearly out of the position by then, and wait to see the numbers before evaluating the merits of pursuing it further.
Using history as a guide, this spike in Oil prices will likely not burst while so many people — frustrated from previously wrong calls of a top at $80, $90, $100, etc — 
I forget how that saying exactly goes.
Oh no. Not even close.
