Whatever Happened to Oil...
One look at the XLE and the SPX index charts today is enough to tell us that it is the oil stocks which are capping the rally that began yesterday. With oil ticking down and with the lack of leadership from the rest of the sectors, the market just can't seem to get over the hump here. ExxonMobil and ChevronTexaco have quietly come down 15% month-to-date -- could this be the start of a sector rotation into technology, perhaps?
WMT, now trading at $46.50, is nearing my short-term price target since I recommended the trade a few days back. It could be wise to take 1/4 of the short puts position off here (especially since the volatility has come down as well), and see what happens next month, after the Fed meeting and just before its earnings announcement.
Speaking of earnings, those have generally been quite good (especially if you sell cellphones or financial advice), with a few notable exceptions (INTC, EBAY), but the question remains how sustainable any rally would be, given the tough macroeconomic climate. For example, I can't be positive about retailers which cater to the middle class -- if there is even such a thing called middle class left in America anymore. With the long, cold, hard winter ahead of us, and gas prices remaining high, "middle-class consumers" would be hard pressed to loosen their wallets and live on credit, day-by-day like they have done in the past. The luxury retailers and the ones catering to the least fortunate amongst us, I feel will do just fine, because their clienteles either don't care too much about gas prices (basking in the glory of earning over $250k/year as a household), or are just too poor to shop anywhere else but at the discounters, respectively (because they do have to shop SOMEWHERE). Thus, we are left with a big void in the middle: perhaps the works of not only the macroeconomic climate, but also of social and political conditions that have shaped the demographic landscape of this country in the last decade or so. But that's probably food for thought for another discussion...
In the meanwhile, I would continue to have a mildly bullish bias heading into the end of the month. If the XLE and oil firm up, I would expect the market to slowly creep up -- climbing the wall of worry, as a lot of pundits like to say. ;-)
WMT, now trading at $46.50, is nearing my short-term price target since I recommended the trade a few days back. It could be wise to take 1/4 of the short puts position off here (especially since the volatility has come down as well), and see what happens next month, after the Fed meeting and just before its earnings announcement.
Speaking of earnings, those have generally been quite good (especially if you sell cellphones or financial advice), with a few notable exceptions (INTC, EBAY), but the question remains how sustainable any rally would be, given the tough macroeconomic climate. For example, I can't be positive about retailers which cater to the middle class -- if there is even such a thing called middle class left in America anymore. With the long, cold, hard winter ahead of us, and gas prices remaining high, "middle-class consumers" would be hard pressed to loosen their wallets and live on credit, day-by-day like they have done in the past. The luxury retailers and the ones catering to the least fortunate amongst us, I feel will do just fine, because their clienteles either don't care too much about gas prices (basking in the glory of earning over $250k/year as a household), or are just too poor to shop anywhere else but at the discounters, respectively (because they do have to shop SOMEWHERE). Thus, we are left with a big void in the middle: perhaps the works of not only the macroeconomic climate, but also of social and political conditions that have shaped the demographic landscape of this country in the last decade or so. But that's probably food for thought for another discussion...
In the meanwhile, I would continue to have a mildly bullish bias heading into the end of the month. If the XLE and oil firm up, I would expect the market to slowly creep up -- climbing the wall of worry, as a lot of pundits like to say. ;-)
posted by Ivan at 10/20/2005 11:12:00 AM
2 Comments:
great blog!
Ivan
commodity traders are looking at the 56-60 range in WTI crude- if oil holds it then it will bounce to new highs but if no bounce from here, very bad for oil price, and then oil co.s and the SPX
A
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