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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: 2sigma who wrote (52117)	8/5/2004 11:56:12 PM
From: Taikun	Read Replies (1) \| Respond to of 74559

OT/ One idea is that $45 oil, or $35 oil for that matter, is ot good for the economy, so overall demand will decline. The other idea is that the average stock is 80% correlated to the index, so even being in oil doesn't provide that much protection. I laughed when the news showed Pixar's 100% increase in profits (not to belittle Pixar, but some energy companies have been doing much more than hat, but they are not the darlings of Wall Street, and sold off. For an example, look at MVKs chart after they reported a 5100% increase in profit a couple of weeks back-it sold off) Finally, even with $44 oil, most investment banks are stillunderweight or neutral energy, I could be wrong, just what I've read. I think we may get a little bounce but overall it is still looking bearish.

To: 2sigma who wrote (52117)	8/6/2004 3:20:54 AM
From: macavity	Read Replies (2) \| Respond to of 74559

I have no idea why they are behaving the way they do. Usually (with Gold this is true) the stocks have a greater leverage to changes in the commodity price than the simple commodity. I.e. If the company is profitable at 20$ a barrel then at 40$ it is more than twice as profitable due to the relationship of fixed and variable cost - i.e. its fixed costs have not changed/doubled. When the commodity races off and the stocks underperform, then I believe that Mr Market is telling you something (assuming the companies are competent). With Gold this relationship (stocks lead) has kept me out of a lot of trouble - for example $HUI is currently underperforming the metal. With Oil stocks it may be different, but I have no reason to believe it should be - the commodity reacts to shorter-term news events/expectations; the stocks to longer-term expectations. IMO the stocks are not saying that we are going to get 50$/barrel (long-term) but the commodity may get there (short-term). If the commodity is unconfirmed by the stocks then I really have doubts on any new paradigm. That is my theory. My P&L from the past 2 days says the complete opposite and I am close to being stopped out. I will wait for a new low in the weekly bars to re-enter, with a macd-histo bear signal. QM<42.60 looks like my new (breakdown) level. I am of the view that we are about to enter a recession. On quarterly charts lows have been broken for both $SPX and $NDX - yesterday was a new closing low for both. Oil is essentially demand driven over the cyclical timeframe(as supply is run by idiots OPEC). If as I believe that the US may begin to head into a recession ($SPX<1060) and crazy China uses brute measures to reduce growth, then demand will start to fall. If this is true then we could see a significant top in oil. For now it is in a Secular/Cyclical and Intermediate Bull, and I should leave top-picking to the smart or the lucky. Who knows? Not me! Short QM -macavity