That was also a factor, but given that there is no trading on Monday, the markets rose sharply in anticipation of such an event. I believe the exact comment I read was that no one wanted to be short over the weekend. Iraqi oil production is already spotty, not that the market could not use it.
Separately, refineries are running full tilt, but demand is moderating and it should be noted that if that moderation continues and there is a break in electrical generation due to weather or economic activity, the signs of which began to show this week, the inventory situation will improve at an accelerated pace. Inventories levels today are not alarming (according to Bloomberg) and out of nearly 50 analysts and managers surveyed, the field is equally split about the direction of oil prices for next week.
With these stocks trading at levels that are significantly higher than they were 6 months ago, and with the oil service names not yet breaking through their March highs and at the downward sloping resistance line (long-term), I tend to think that there is a challenge for OSX to overcome and I don't see it happening just yet. Moreover, I do not think the XNG will run through the summer either. In fact, it always, year after year, gets tagged in the summer and it needs to retrace and rebuild a support base. The XLE is near its highs and it has 25% short interest on light volume. Volume in the XLE has been very heavy lately (last couple of months) and this tells me there is some rotation going on both sides of the camp. It is getting pretty toppy to me and interesting because I think things are going to break rather hard in either direction. I guess time will tell which direction that is, but coupled with interest rates, the pace of economic expansion, the desire to cool inflation and overheating economic activity in Asia coupled with increased OPEC production, and a late summer that is not toasting anyone just yet, I think we are richly rewarded with prices at this level. I don't want to be a pig and get slaughtered and I also want to make money on the opposite end of the trade.
And yes, I am being very nimble and locking in marginal gains whenever I can and re-establishing positions later in the day or days later when there is a lot of volatility. The market tends to fool most people, so I am also wary of the suggestion that there is one path only and that it is straight to the top. I got lucky Friday. Hopefully I'll get lucky again soon.
Best regards, |
