"and you don't think oil will go back to 100? I bet it does by Spring. All we need is another middle east crisis.'
You fail to understand that demand is falling off like a rock. And China and India cannot make up for that loss of demand.
A better bet is you may as well short unleaded gasoline as that appears to be heading to under a buck a gallon.
Ahhhh 1980 gas prices..muscle cars. $30.00 oil. Deflation is good for some people
Unless we see some better news, today's decline may be a picnic. CNOOC and Petrochina are both down nearly double digit percents.
Arcelor Mittal, the world's largest steel maker, is slashing production 35%. (Great time to bump up iron ore prices, right, Winny?).
Cisco reported an expected revenue decline of 9% in October, and their shares got pummeled 10%.
A Chinese magazine said coking-coal contracts for supply there would fall at least 30%.
News Corp. just reported earnings were down 30%, slashed its outlook, and its share price is down 20%.
The weekly oil report showed a very mild 1.3% week over week increase in gas usage, however YOY comparisons still show a 0.3 mbpd decline. Oil and gasoline stores are almost exactly where they were a year ago, It seems oil is stuck between $60 and $70 for the rest of the year outside of an unforeseen event.
Usually when we see these massive moves, currency rates go flying around but not tonight.
So what we have is neutral news on the dollar and oil and God awful news in the business sector. It's hard to get a better cross section of business than MT, News, and Cisco. If there is any reason for PBR to go up tomorrow, I can't find it.
That is why this last move up was a sucker's rally. Eventually, October's terrible numbers would have to be reported and drag the market back down into the gutter. We will have a rally more based on price (P) than earnings (E). This one just was not it.
Rem, the market and PBR are up because of a weakness in the dollar. The LIBOR rates have finally come down which meant that cash and the dollar are not as scarce as they were. That in turn has not just driven up the Real and oil but virtually all currencies and all commodities.
There was also a Reuters report that suggests the Saudis have in fact cut oil production. And I found that report credible. That move should put a floor on oil if the Saudis hold it.
See the link:
So that is why you saw PBR move up today, but the news tomorrow is all going to be about the election and what it means. And for the most part, markets move more on emotion in the short term than data.
So assuming we have an Obama victory, I think you have to count on two things. Emotionally, I think there will be support for a stronger dollar as people around the world feel the U.S. is going in the right direction. Remember if this were a world election, Obama would win a landslide. So foreigners are going to feel better investing in the U.S.
Secondly, I would look for U.S. oil companies to dip out of fear that Obama is going to hit them with a windfall profits tax. I suspect PBR may fall in sympathy with the U.S. oil companies (even though a U.S. windfall profit tax does not directly affect PBR.)
So, yeah, I would take some profits on PBR, but LIBOR rates are still at 2+%, and they should be at around the fed. funds rate of 1% or so. That means this rally still has some legs, and with a falling LIBOR rate, the Real and oil should get somewhat stronger in the next few weeks. So I would take profits but look to re-enter again soon.
However, in the longer term for oil/PBR to stay high, there has to be a resurgence in demand. And for the Real to stay up in the longer term, there needs to be a resurgence in commodity demand. And I don't see either of those two things happening. I may change my mind once we get better data, but this still looks like a bear market/sucker's rally to me fueled by easy cash.
"but this still looks like a bear market/sucker's rally to me fueled by easy cash."
I think the last 1/3rd of the market's decline was panic-overshoot, and that it can recover by approximately that much without fear of it being unsustainable. If so, I think we could see and hold a 10K DOW level until the direction of the economy becomes clearer.
One other thought about collapse of a "sucker rally" is that for every dollar in the hands of traders with ready access to electronic trading and with very short time horizons, there are probably $5 on the sidelines controlled by people who are just now getting the feeling that maybe it is safe to go back in. So there is a possibility that traders sensing a shorting opportunity might get drowned in a rising wave of money moving back into the market. That foreign angle you raise (Doc) could contribute to that effect, sustain the rally and make life dangerous for shorts.
Doc, I agree this rally has come with not much info or data to base it on.
What is a sign this rally will start to fizzle?
I still think we will see oil go up in price. Also I believe Saudi has dropped production more then they are saying.
<<Secondly, I would look for U.S. oil companies to dip out of fear that Obama is going to hit them with a windfall profits tax. I suspect PBR may fall in sympathy with the U.S. oil companies (even though a U.S. windfall profit tax does not directly affect PBR.)>>
LOL, what kind of logic is that?
If the US imposes WPT's on US based majors, PBR should look better on a relative basis.
Especially since the possibilty of nationalization of US-based oil companies could become more an issue now.