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SPDR S&P 500 ETF Message Board

hedgehog25 4 posts  |  Last Activity: Apr 28, 2016 4:12 PM Member since: Aug 1, 2007
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  • hedgehog25 hedgehog25 Apr 28, 2016 4:12 PM Flag

    Technical analysis is dangerous for people who don't understand it, or those who look for the patterns they want to see. It always makes me roll my eyes when people start shouting out technical patterns that haven't fully formed. A partially formed (unconfirmed) chart pattern has ZERO predictive value. Every upward price channel creates multiple partial double tops on the way up, and every downward price channel forms multiple partial double bottoms on the way down.

    Even if it reaches the previous top and starts to pull back a bit, it still isn't a double top. Why can't some people get it through their skulls that it's not a double top/bottom until it breaks the trough? A double bottom like a W, and a double top looks like an inverted W (in a font where the middle is lower than the sides). Looking at the WTI chart, I see a double bottom, confirmed at the beginning of March.

  • hedgehog25 hedgehog25 Apr 28, 2016 4:09 PM Flag

    I think the next pullback will bottom out between 38 and 42, if it comes soon. If the rally continues to the upper 40s before a pullback, then it might only pull back to the mid 40s. If you're looking for 32 again with U.S. production in a sustained downtrend, you're going to be disappointed.

  • Reply to

    Short again at $10

    by mikiecrusher Apr 6, 2016 12:01 PM
    hedgehog25 hedgehog25 Apr 28, 2016 3:45 PM Flag

    Thanks. I do want to make it clear, though, that I'm not making any KINGCALLs by any stretch of the imagination. I don't think the conditions exist for a long term bull market, I just think oil prices overshot to the downside to fundamentally unsustainable levels, and it was inevitable that they'd bounce back to at least the mid 40s.

    I wouldn't be surprised to see the uptrend continue and crack 50 heading into driving season, but it's not obvious enough to me to be worth betting on. I *would* be surprised to see 60 anytime in the next few months, and might jump back in on the short side if that happens.

    I think equilibrium now is around the mid 40s, and prices will keep being pulled to this level like a magnet, as they have for the past year. The equilibrium price might drift up into the 50s, depending on how long and how deeply U.S. production continues to drop, but a bull market is not in the cards because the upside is still capped by the same fundamentals that made prices crash in 2014-15, and there's no good reason to think those fundamentals are going to change in the next few years.

  • hedgehog25 hedgehog25 Apr 28, 2016 3:19 PM Flag

    Good call. I stayed long after the inaction at Doha too. I've been saying for a while, it's not all about OPEC and producers' meetings and coordinated cuts!

    As I mentioned at the time, when Saudi oil minister Al-Naimi said a couple of months ago that the market will rebalance oil supply and demand, leading to higher prices, what he meant was "We don't need to cut, because low prices will force cuts by higher cost producers, especially U.S. frackers, Why should we voluntarily give up market share when other countries will be forced by economic law to cut production instead of us?"

    Well, U.S. production has been down for 7 consecutive weeks, 12 of the last 13 (the only exception being a lousy 1kbpd increase reported March 4th), and has been in a sustained overall downtrend since July. Throughout this downtrend, rig counts have continued falling, even recently while prices have bounced back into the 40s. This downtrend is NOT stopping anytime soon.

    That said, I did take half my position off the table yesterday and switched the other half from UWTI to UCO, and I think maybe now it's time to sell out altogether. A bounce from sub-30 to the mid 40s was obvious, but it's more iffy going forward. I do think it's still in an uptrend, but it looks ripe for a pullback soon.

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