Oil <$60/barrel, time to buy stock

[WHODAT@THADOR]

Im talkin ES, NQ, YM. I only daytrade TF, have not ran a big chart in awhile on it. Every once in awhile I'll check a 314 min out on it. Usually tho have no need to go beyond a 2618T since I dont position trade it. Personally, I been real curious about how that chart I posted in another thread plays out. GC goes to 900 because its the next greatest trading commitment zone. ES goes to 2230
since its the 1.809 ext of the rt5. Then what right? Gotta wait for the signals I guess. Does ES pull back off it? Or do we go truly parabolic into a vertical and gold doesn't find support there and we see 600 on gold and it consolidates in that range for the next decade.

 

[bluerock]

Check out the daily cash Russell. Breakdown out of ascending wedge, check. Hanging man candle at top, check. Moving down in a 3 wave pattern, check. The bigger issue is intensifying credit deterioration...and accompanying deflation. Equities won't trade up against that for long.

As for gold, there is a derivatives nightmare brewing which has no historical precedent to compare against. Forced liquidation could drive it much lower but that may well occur after a correction upwards. I expect gold will revive in the short term.

 

[heckler73]

As for gold, there is a derivatives nightmare brewing which has no historical precedent to compare against. Forced liquidation could drive it much lower but that may well occur after a correction upwards. I expect gold will revive in the short term.

What derivatives are you talking about?

 

[HolyGhost23]

oil is gonna sink like a stone.. Saudi Arabia.. can and will produce oil at 25 bucks a barrel.. the US dollar is based off oil.. it will fail and soon. the cost of a frac job for a single well costs so much that oil needs to be at at least 50 for it to be on par for the cost of the job vs what you get from the well.

just you see frac companies will be going bankrupt. off setting thier high risk loans.. and bam.. 1930 but worse..

I work in the oil industry.. and its fucking going down.. not so much way up in Canada for natural gas its okay...but alberta..which is like texas north..is hurting bad. just had like 30,000 jobs go up in smoke over the summer...

invest in oil when it hits 25 a barrel

 

[heckler73]

oil is gonna sink like a stone.. Saudi Arabia.. can and will produce oil at 25 bucks a barrel.. the US dollar is based off oil.
...
invest in oil when it hits 25 a barrel

The Arabs can pump it out at $12 and still break even. If you think it is a tool of economic war, then don't be too quick to pull any triggers. Step carefully.

 

[Balzac89]

 

[bluerock]

What derivatives are you talking about?

https://en.wikipedia.org/wiki/Over-the-counter_(finance)#Importance_of_OTC_derivatives_in_modern_banking
https://en.wikipedia.org/wiki/Derivative_(finance)#OTC_and_exchange-traded

OTC derivatives are several hundred trillion $ of private leveraged bets that can not be paid off in an adverse market outcome. That fact alone will drive an adverse market outcome. The first thing to be liquidated in an emergency are "good" assets, which would currently include equities and, to a lesser extent, things like gold. On the plus side for gold, plenty of buyers will - and are - materializing in the face of what plainly looks like the beginning of an OTC derivatives meltdown.

However, there is the question of priority. The first to go will be non-USD denominated instruments. That is why the EUR etc is going up; margin called counterparties need the currency in which the call is being made. When this process reaches the USD, gold will almost certainly decline, and sharply...as to when that will happen, that is a damn good question.

This is not something that can be "back tested" or similarly analyzed as there has never been a historical precedent of non-linear derivative contracts outstanding as such a multiple % of global GDP.

 

[heckler73]

OTC derivatives are several hundred trillion $ of private leveraged bets that can not be paid off in an adverse market outcome. That fact alone will drive an adverse market outcome.

Is that all? It used to be on the order of $1.2 Quadrillion.
Do you know the breakdown of those derivative products? Are any of them of the "squared" variety?

 

[srt42fast]

Forgive me if some one has already posted this. But the decline of the price in oil, in the U.S, is due to the commodity being stored in an abundance. The U.S reserves for oil are over flowing, and our need to export oil is at a minimum. If you are playing oil thinking it is going to shoot up you may be wrong. The most logical play (one I currently have a position in) is to buy $20 call options on ticker: USO. Wait for the stock to get near the $20 range (18-19$ is good) and dump it.

It will be a long time before the U.S needs oil, therefore the price will remain low for a long time. So if you are one who sees low oil prices and thinks, "Dump all my money in it, i'll be rich," you might be the one that is getting played.

 

[bluerock]

Is that all? It used to be on the order of $1.2 Quadrillion.
Do you know the breakdown of those derivative products? Are any of them of the "squared" variety?

Nobody knows the breakdown, or the true amount extant, as "OTC" refers to private transactions. But, based on past incidents, it is safe to say that the buyers not only don't understand the underlying risk but often don't even know what the hell they have actually bought. Both parties expect to be bailed out by the government if things don't go their way. That's a quaint idea that works if you have only one LTCM to bail out AND it is a bull market. But hundreds (or thousands... tens of thousands?) of them in a bear market? Forget it.

I am wary of hyperbole but the only possible outcome of such a situation is that the entire global economy will be crippled for decades.

 

[bluerock]

Forgive me if some one has already posted this. But the decline of the price in oil, in the U.S, is due to the commodity being stored in an abundance. The U.S reserves for oil are over flowing, and our need to export oil is at a minimum. If you are playing oil thinking it is going to shoot up you may be wrong. The most logical play (one I currently have a position in) is to buy $20 call options on ticker: USO. Wait for the stock to get near the $20 range (18-19$ is good) and dump it.

It will be a long time before the U.S needs oil, therefore the price will remain low for a long time. So if you are one who sees low oil prices and thinks, "Dump all my money in it, i'll be rich," you might be the one that is getting played.

The chart on USO does not look promising. What makes you think that $20 call options on that will do anything other than expire worthless? Isn't buying such options "playing oil thinking it is going to shoot up"?

 

[heckler73]

Nobody knows the breakdown, or the true amount extant, as "OTC" refers to private transactions. But, based on past incidents, it is safe to say that the buyers not only don't understand the underlying risk but often don't even know what the hell they have actually bought. Both parties expect to be bailed out by the government if things don't go their way. That's a quaint idea that works if you have only one LTCM to bail out AND it is a bull market. But hundreds (or thousands... tens of thousands?) of them in a bear market? Forget it.

I am wary of hyperbole but the only possible outcome of such a situation is that the entire global economy will be crippled for decades.

Personally, I think you're over-reacting. If you're not even aware of the size, nor makeup, of the derivatives market, then what are you panicking over?

http://www.bis.org/statistics/derstats.htm

 

[bluerock]

From your link: "From December 2011, Australia and Spain began contributing to the semiannual survey, bringing the number of reporting countries to 13." Wow, a whoppin' 13 countries reporting. That being said, most people would indeed agree with your assessment. That's how this inevitable catastrophe came to exist in the first place. Time will tell, and we will find out sooner than "most people" think.

Note that the size of the market varies based on the performance of those items from which the contracts are originally derived. Little or none of it is a linear calculation.

 

[srt42fast]

The chart on USO does not look promising. What makes you think that $20 call options on that will do anything other than expire worthless? Isn't buying such options "playing oil thinking it is going to shoot up"?

Sorry bluerock, my post was a little unclear. My position in USO is to play a quick bounce, not for a long term investment. If you look at the Jan 17' call options they are a fair value with the recent decline. I haven't checked the delta on the option strike since last wed, however, it was favorable last week (due to the sharp decline).

But if you look at the USO chart around the july time frame of this year I made the same play. Bought $20 call options once USO (and a barrel of oil) hit a low, people responded by buying causing mild volatility and a spike in price. The price went from $13.xx to nearly $20.xx in a short time period.

Again, this is just a short play for the time being; one that I like to play when oil or certain commodities create a new low.

 

[bluerock]

Sorry bluerock, my post was a little unclear. My position in USO is to play a quick bounce, not for a long term investment. If you look at the Jan 17' call options they are a fair value with the recent decline. I haven't checked the delta on the option strike since last wed, however, it was favorable last week (due to the sharp decline).

But if you look at the USO chart around the july time frame of this year I made the same play. Bought $20 call options once USO (and a barrel of oil) hit a low, people responded by buying causing mild volatility and a spike in price. The price went from $13.xx to nearly $20.xx in a short time period.

Again, this is just a short play for the time being; one that I like to play when oil or certain commodities create a new low.

Best of luck with your trade, but if I were inclined to bet on oil, I'd be buying puts. Falling equities won't support rising oil unless there is a supply crisis. But, sure, it could do a dead cat bounce. Just a guess, but I expect to see $30 before $50 (crude futures).

 

[Balzac89]

Is it Black Monday?

 

[bluerock]

Is it Black Monday?

No. I am showing a mere 3.8% (Nasdaq) decline today. That's not BM territory, original BM (1929) was -12.8% and -22.6% in 1987. Big difference as 1987 crash was a cyclical bear in a secular bull. 1929 initial decline was the start of a long secular bear. I expect further selling before a vicious bear market rally. Lots of people bought the "blood in the streets" today. In theory, they are early.

 

[Corso312]

With oil below $60 a barrel, I think it's time to buy some stocks in oil companies (lease operators) and oil field service providers

My little bro just spent a few grand on oil field stocks and my dad just spent 50

Some companies I'll be looking at since I'm home from North Dakota on my days off per today through Jan 3rd:


oil companies:

-exxon mobil
-british petroleum
-encana
-whiting
-continental resources
-kodiak

*all major players in the bakken, three forks and tar sands formations that are major plays right now with very high overhead costs

oil field service providers:
-nabors
-unit
-haliburton
-baker hughes
-sanjel
-weatherford


I'll be consulting with my fidelity adviser and looking at companies that focus exclusively on drilling and possibly fracking before placing my bets...since drilling followed by fracking are the two most costly operations in well production

Lost your ass, I'm assuming?

 

[Lord Kanti]

Oil dropped below $30. Maybe one day the price at the pump will reflect this.

 

[Corso312]

I paid 1.80 yesterday in Chicago..which usually has the highest gas prices in the country.