I haven't been using energy stocks, as they seem fairly priced now (many are depleting assets, not growth plays). Exceptions might be RDC, ESV, and GSF, but a bit cheaper. I may use XLE at 34. Instead I've reentered the sector via Feb HO futures, which I bought yesterday and Wed at about avg 1.29. I will buy more at 1.25. I'm also looking at July HU (gasoline), but I'd like to see the COTs first.
The market could use a weather break, but since we can't predict that, I feel it's more important to focus on the specs and funds that really dominate this market. Funds were not heavily long going into this break, and in fact I believe they may be short now. This is not especially a fund liquidated decline, it may in fact be an aggressive fund lean on or shorted market. If so, that would be a gift. Specs/funds were long 64,205 of the energy subtotal (CL, HO, HU, NG) on 11-23. But they were long 240,093 on May 23 at the intermediate oil high in late May, and again 147,099 at the Oct. 5 high.
stockcharts.com[w,a]daclniay[pd20,2!b50][vc60][iUc20!Lf]&pref=G
They already appear flushed out and maybe even short. Note 200 MA in WTI is 42.33.
There will be a COT released this afternoon,
64.82.65.31
but unfortunately it will only be through Tuesday the 30th, BEFORE the two day waterfall decline. However, for 11-23 we can see they were ALREADY short 113 futures w/options in HO, so I have to assume that eight rough trading days later they are solidly short at least HO.
Fundamentally, energy bulls have not just peak oil slowly working, but also demand pulling. India and China alone have increased oil demand of 200,000 bpd per month, that's a brick unsustainable wall. Therefore my approach is to get long when the funds get short (or flat), should be a winning trade over time.
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