Comments on: $150 Oil to Crash Stock Market on Monday

By: Matt Trivisonno’s Blog » Blog Archive » Market Fails to Crash

Matt Trivisonno’s Blog » Blog Archive » Market Fails to Crash — Tue, 24 Jun 2008 01:02:47 +0000

[...] market failed to crash today as I predicted last week in “$150 Oil to Crash Stock Market on Monday.” Was I crazy to predict such a thing on a specific day? Of course, but what do I care? I [...]

By: admin

admin — Fri, 20 Jun 2008 20:43:54 +0000

The USO chart is still strong. It gapped-up today and then held the gap; that’s strong action.

Matt

By: Dressguard

Dressguard — Fri, 20 Jun 2008 16:38:53 +0000

OPEC meeting on the weekend will be very frustrating for the equities bulls. Oil production will be unchanged. On top of that, Israel trying to bully Iran could kindle the spark for oil to jump over $150. My guess: more than 50% likelihood oil will set a new all time high record next week.

By: Danny

Danny — Fri, 20 Jun 2008 00:22:33 +0000

If oil goes down big, it might be a precursor to a move down in the entire market. Oil might be the tip off that the deflationary spiral is kicking in. That is what the weakness in the markets even with oil dropping is telling us today. If oil stays where it is even with deflation kicking in (unlikely, but it could become a safe haven like gold, or both could temporarily correct severely), things will get uglier than even I am seeing them. Long term trend for oil is up, even with a deflationary collapse, but oil and commodities in general could see a pretty severe correction short to medium term.

By: SK

SK — Thu, 19 Jun 2008 21:30:58 +0000

Also Crimson:

Note that there are a large number of funds which are hugely long on oil. Any sharp correction in oil, and you’ll see these funds hit with the margin calls. And they’ll have to sell other assets to cover those calls.

Not exactly a good recipe for rally.

- SK

By: admin

admin — Thu, 19 Jun 2008 20:59:47 +0000

Crimson Ghost,

Oil down almost $5 and the S&P 500 up a whole 5 points? Not exactly a disaster for the shorts, right?

Matt

By: SK

SK — Thu, 19 Jun 2008 20:58:21 +0000

Matt:

Short on Tech by identifying parabolic run-ups and purchasing long-term Puts on them - typically 6-12 months out. To optimize the costs, one can think about out-of-money options.

Crimson:

Oil will probably correct sharply - to about $100-$110, and market may rally sharply on it. However, I’ll take the opportunity to short the indices. Reason is simple - some of the indices (such as S&P) have not shown sharp declines in earnings/dividends due to energy. Once oil corrects, the earnings will also correctly sharply.

Secondly, credit crunch has not gone away. Consumer spending is slowing dramatically, and $100+ oil is still much higher than what US economy can handle during a vicious recession.

If oil falls to $100 or so, I plan to go long on it. Just wait till that attack on Iran facilities, and we’ll see oil back above $150 in matter of days.

Full Disclosure: No special knowledge, just speculating based on news reports. I expect the attack around July-end/August after we see the sharp decline in the price of oil.

- SK

By: Crimson Ghost

Crimson Ghost — Thu, 19 Jun 2008 20:11:01 +0000

A $3 hit in oil triggered an explosive rally in airline stoks today.

I am agnostic on oil short-term.

But am quite convinced the next MAJOR move will be down.

And heaven help the shorts when that happens.

By: admin

admin — Thu, 19 Jun 2008 18:21:41 +0000

Hi SK,

How are you planning to short tech? I’m have a large QID position now, along with a few QQQQ puts.

Matt

By: admin

admin — Thu, 19 Jun 2008 18:18:50 +0000

This comment is from SK. I accidentally hit the spam button on it. (You never see the spam because I delete them all.)

SK wrote:

“I actually did short real-estate, financials, mortgage insurers etc. over a year ago through LEAP Puts. And yes, there was a time where I was looking at 30%+ paper losses.

A year later, absolutely fabulous returns. (Short positions: WM, CFC, PMI, MTG, C, TOL, BSC, LEH…….the list was quite extensive.)

Currently, getting short on technology and will use upcoming rally to short indices.

On a lighter side, Kramer’s four horsemen (or horses) are soon going to roll over.”