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hedgehog25 26 posts  |  Last Activity: Jan 30, 2015 8:50 PM Member since: Aug 1, 2007
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  • Reply to

    REMINDS ME OF JAN. 2008.

    by s240zracer Jan 2, 2015 11:25 AM
    hedgehog25 hedgehog25 Jan 30, 2015 8:50 PM Flag

    Hardly. The majority of analysts (pronounced with a long "a" at the beginning) on CNBS were also bullish a year ago, and two years ago, and three years ago. How "easy peasy" was it to go short at those times?

    There was a time when I thought the prevailing sentiment on CNBS was a contrarian indicator, but over time I've realized that it's no indicator at all, either way. Most of their talking heads basically just stick their finger in the wind, and try to dress that up with fancy-sounding "analysis". If things are going up, they predict they will keep going up higher and higher indefinitely. If things are going down , they predict doom and gloom.

    If you're looking for a contrarian indicator, just focus on Jim Cramer. If he's really, REALLY excited about a stock that has been trending up for a long time, it's virtually guaranteed to be near the top. If he's telling you to SELL SELL SELL SELL SELL a stock that has been trending down for a long time, buy with both hands like there's no tomorrow.

    Other than that, looking for any clues from CNBS, either by following their advice or deliberately going against it, is a good way to lose your money. I used to have a TV with CNBS on all day while trading. Now I don't even bother to watch that network anymore. It's a complete waste of time.

  • Reply to

    REMINDS ME OF JAN. 2008.

    by s240zracer Jan 2, 2015 11:25 AM
    hedgehog25 hedgehog25 Jan 30, 2015 8:37 PM Flag

    I think you hit the nail right on the head. Nice to see an occasional level-headed person among the throngs of wide-eyed optimists saying the S&P is going to 2500+ by the end of the year and doomers who say we're about to fall off a cliff.

    Yes, it's looking very much like January 2000. Stock valuations have become inflated, causing a correction despite widespread optimism about the economy. As in Jan '08, I think there's still more upside after this correction, and a real bear market will probably begin later in the year. But it's not likely to be anywhere near as bad as '08-'09.

  • Reply to

    REMINDS ME OF JAN. 2008.

    by s240zracer Jan 2, 2015 11:25 AM
    hedgehog25 hedgehog25 Jan 30, 2015 8:29 PM Flag

    Earnings weren't "cratering" yet in January '08, but bellwether companies were consistently giving weak reports and cutting guidance. Recent earnings have been a mixed bag, but just yesterday a top 10 retailer reported a HUGE beat and record revenues.

    The person who said it's more like January 2000 has the right idea. You're exaggerating. A LOT.

  • Reply to

    REMINDS ME OF JAN. 2008.

    by s240zracer Jan 2, 2015 11:25 AM
    hedgehog25 hedgehog25 Jan 30, 2015 7:58 PM Flag

    In fact, in January 2008, pretty much every economic indicator was starting to swirl down the toilet. The housing bubble was in the midst of deflating, with no end in sight. The banking system was going into a tailspin and the wheels were starting to come off. The labor market was stalling. Companies were missing earnings estimates right and left. Oil prices were going through the roof. The Fed hadn't started handing out free money to institutional investors.

    Anyone who thinks the current situation is even remotely reminiscent of 2008 is delusional. This is a run-of-the-mill correction. It's not even a bear market, let alone the early throes of a 50% collapse.

  • hedgehog25 hedgehog25 Jan 30, 2015 6:01 PM Flag

    The most important thing to realize about market analysts is that "analysts" should be pronounced with a long "a" at the beginning, as in "ace". That pronunciation reveals where they pull most of their advice out of.

  • Reply to

    This is just short covering

    by david230060 Jan 30, 2015 5:38 PM
    hedgehog25 hedgehog25 Jan 30, 2015 5:45 PM Flag

    But it's also a short-term technical breakout, so I expect the rally to continue at least into the early part of next week. After that, I agree that it will probably fade and re-test the lows (I mean, spot prices will; UCO could hit a new bottom if there are a lot of day-to-day swings). A real turnaround is more likely in the spring.

  • hedgehog25 hedgehog25 Jan 30, 2015 5:42 PM Flag

    It feels as if I was answering this same question just yesterday.

    Actually, it *was* just yesterday. Here is what I posted:

    There's no solid basis for correlating the price of UCO to prices of oil, because the price of UCO doesn't just depend on what price/bbl oil reaches, it depends heavily on how it gets there. High contango is going to hurt all oil ETFs. A leveraged ETF like UCO will benefit if the price of oil rises steadily, but if the price increase is very jagged, the re-balancing of assets will further detract from its gains.

    So, you can't meaningfully estimate UCO's price at a given oil price months in the future. You can just generalize that if oil is trending up, UCO will nearly always trend up more steeply. If there's a strong short-term uptrend, UCO will likely outperform 2x the price increase, but in a jagged uptrend, it will underperform 2x the price change. It's theoretically possible for UCO to remain flat or even slip while oil prices are trending up, but that's exceedingly unlikely for the duration of an uptrend. Long term, UCO is practically guaranteed to underperform. If you think oil is going to a certain price, then keep buying on dips and cashing out on spikes on the way there rather than just loading up and holding long term, or you'll be disappointed.

  • Reply to

    When the bottom comes

    by who_gnu_1235 Jan 28, 2015 6:28 PM
    hedgehog25 hedgehog25 Jan 30, 2015 5:38 PM Flag

    Well, here's your up move. Hope you got in earlier in the day, because getting in now would probably feel like chasing a rally. I do think there's more upside, though. Don't be fooled by the fact that UCO and USO both pulled back at the end of the day to close just under the 20-SMA, which is usually a bad technical sign if you're looking to get in after a sustained downtrend; WTI spot prices actually closed above the 20-SMA, so I think this is a genuine technical breakout.

    On the other hand, don't forget the New Year's Eve breakout at the end of 2008, which looked very similar and turned out to be short-lived, the real turnaround coming two months later. I think it's likely to happen in a similar fashion this time around as well, especially considering the time of year. Just ahead of the typically softest demand of the year between winter heating season and summer driving season doesn't seem a likely time for a sustained turnaround. Should be good for a few more days, but I'm looking to mostly cash out by mid-week. Definitely shedding the options early; might keep half the shares for a while longer. I'll buy back in only if the lows are re-tested after that.

    You may be right about the appropriate value for oil at ~70/bbl, but the way I'm looking at it is that going back to ~55-60 is OBVIOUS, and beyond that it becomes more speculatory. I'd rather stick to trades that seem really obvious to me.

    Regarding your question at the end, I'm not trading any oil companies, just UCO. Other than this, I'm mostly just shorting the spike in VXX. The higher it goes, the more I short. Like I said...I'd like to stick to trades that are obvious. ;)

  • Reply to

    $2 on this

    by checking_here Jan 20, 2015 11:02 AM
    hedgehog25 hedgehog25 Jan 29, 2015 3:49 PM Flag

    I agree that breaking shale is the key constraint on price, but I think it's already low enough for that, and even has room to go up. Anything under 60 effectively cripples shale extraction. The average break even price for shale projects is ~80, and more than 80% break even at 60+. Keep in mind that break even price or slightly above is not sufficient incentive to make it worthwhile.

    OPEC knows that sub-50 prices are killing their profit margins for no gain. I can see it easily going up $10/bbl from here; I can't see it going below 40.

  • Reply to

    $2 on this

    by checking_here Jan 20, 2015 11:02 AM
    hedgehog25 hedgehog25 Jan 29, 2015 3:32 PM Flag

    I predict it will go up $2.01 from here.

  • Reply to

    Damn

    by ucolookr Jan 29, 2015 12:41 PM
    hedgehog25 hedgehog25 Jan 29, 2015 2:26 PM Flag

    Well, too late now, but I say *definitely* average down at these levels. Personally I added at 6.57 and even bought some calls, and if it somehow manages to dip even lower before the next significant spike, I'd do it again without hesitation.

  • Reply to

    Price of UCO anad oil correspondence

    by mhagadol Jan 28, 2015 7:49 PM
    hedgehog25 hedgehog25 Jan 29, 2015 2:23 PM Flag

    There's no solid basis for correlating the price of UCO to prices of oil, because the price of UCO doesn't just depend on what price/bbl oil reaches, it depends heavily on how it gets there. High contango is going to hurt all oil ETFs. A leveraged ETF like UCO will benefit if the price of oil rises steadily, but if the price increase is very jagged, the re-balancing of assets will further detract from its gains.

    So, you can't meaningfully estimate UCO's price at a given oil price months in the future. You can just generalize that if oil is trending up, UCO will nearly always trend up more steeply. If there's a strong short-term uptrend, UCO will likely outperform 2x the price increase, but in a jagged uptrend, it will underperform 2x the price change. It's theoretically possible for UCO to remain flat or even slip while oil prices are trending up, but that's exceedingly unlikely for the duration of an uptrend. Long term, UCO is practically guaranteed to underperform. If you think oil is going to a certain price, then keep buying on dips and cashing out on spikes on the way there rather than just loading up and holding long term, or you'll be disappointed.

  • Reply to

    When the bottom comes

    by who_gnu_1235 Jan 28, 2015 6:28 PM
    hedgehog25 hedgehog25 Jan 29, 2015 2:05 PM Flag

    Oh, regarding the narrowing of contango indicating a bottom, I actually think contango will remain high even as prices rise, because I expect prices to rise ahead of the peak in inventories, and the high inventories will keep futures heavily contangoed. That's why I'm looking to swing trade a spike rather than hold for months like in '09.

  • Reply to

    When the bottom comes

    by who_gnu_1235 Jan 28, 2015 6:28 PM
    hedgehog25 hedgehog25 Jan 29, 2015 2:01 PM Flag

    Heh, nice to see anyone still remembers me here. :) You haven't seen me here in years because I haven't touched oil trades in years. When it was in the 30s and 40s it was totally obvious to me that it was hitting rock bottom and had nowhere to go but up. I predicted at the time that it would go at least back into the 80s (though I actually cashed out a little before that, to be on the safe side). Once it got there, in my view trading oil any further was like playing craps. I figured it would sway with the wind, and there was no good basis for predicting which way it would go and when.

    Well, this week it became obvious again. Fair point about the "has to go up and average downers traders" needing to feel pain, because God knows I was one of those back in '09. I started building a position when it was in the mid 40s back then too, and the further $12 drop, the up-and-down swings, and heavy contango were killing the double ETFs.

    I remember posting that I was getting slaughtered and every fiber of my being was telling me to just get out and be done with it before I lost my shirt, but that I had been trading long enough to recognize that as the capitulation point and a sign that the bottom really was near. If you're averaging into a downtrend, the bottom is more likely to be when you're sick to the stomach, not when you're comfortable, and if you can't ride that out you shouldn't get in in the first place. Well, it turned out that *was* near the bottom. :)

    I really doubt it will play out the same way this time, though. I really think under today's circumstances oil can't realistically go below 40. In the financial crisis everyone was selling out of everything no matter what. Just a few months earlier, gold was being dumped at sub-800 prices, for crying out loud!

  • Reply to

    anybody buying this before the close?

    by eldeliaj Jan 28, 2015 3:55 PM
    hedgehog25 hedgehog25 Jan 28, 2015 9:49 PM Flag

    anybody buying this before the close?

    I did. I posted my opinions in the thread titled "When the bottom comes" (stupid Yahoo won't let me post a link to a post at the same site!).

    Basically, I think the downside is very limited at these prices, so any very sharp drop is a good opportunity to average in for a price spike. I wouldn't hold an oil ETF long term when inventories are high, because high inventories mean high contango in the futures market. But I wouldn't DARE short at anywhere near these levels.

  • Reply to

    When the bottom comes

    by who_gnu_1235 Jan 28, 2015 6:28 PM
    hedgehog25 hedgehog25 Jan 28, 2015 9:41 PM Flag

    I agree. The OP is talking about this as if it were a stock, whose price is driven primarily by traders looking to make money off changes in price, as opposed to a commodity ETF whose price is driven by the real world supply and demand pressures on the underlying commodity.

    I think today's sharp drop on the inventory report was an excellent opportunity to buy in. The price is already low enough to put the brakes on high-tech expensive U.S. extraction methods, and for all their rhetoric, it's getting to the point where OPEC countries have to start questioning how much of the limited resource that their economy depends on they're willing to keep depleting for ever thinner profit margins.

    I don't see prices dropping as low as they were in the dregs of the financial crisis. The main driver back then was a collapse in demand; now it's oversupply. IIRC back then OPEC leaders were saying that their ideal price was in the 60-75 range. I think they'll want it back to at least the mid-50s, which would still be low enough to stall shale extraction and sideways drilling.

    The high inventories guarantee high contango which will slaughter oil ETFs in the long run, but I do think we're in for a short term spike in the very near future.

  • hedgehog25 hedgehog25 Jan 21, 2015 2:02 AM Flag

    Yeah, right. The officials handle the ball at the start of every play, and it's their job to remove any deflated ball from play. But the elite officiating crew (only the best ones are selected for the playoffs) failed to notice anything for an entire half, until a Colts player got his hands on the ball, and then instead of alerting the officials, gave it to his equipment manager to do whatever he wanted with it out of sight and THEN complain to the officials?

    This pseudoscandal manufactured by a bunch of crybabies who can't handle being dominated would be funny if this kind of nonsense weren't getting so old and tiring.

  • hedgehog25 hedgehog25 Jan 15, 2015 8:57 AM Flag

    Talk about fishing for any scrap you can find! DAX, FTSE, CAC, AEX, OMX, IBEX, and EURO STOXX 50 are all up, most of them more than 1%.

    And US futures are now green too. Sure, that was boosted by some more bullish economic data, but what does that tell you?

    This is not going to crash stock markets, no matter how badly you want it to.

  • hedgehog25 hedgehog25 Jan 15, 2015 7:54 AM Flag

    Do you have trouble with reading, or do you not speak English very well? I didn't say Switzerland is doing fine.

  • hedgehog25 hedgehog25 Jan 15, 2015 7:31 AM Flag

    Devalued currencies can work wonders for nominal stock prices. :)

    And of course the prices are collapsing in CHF. The exchange rate vs. the Euro is up nearly 20% since 3 hours ago!

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