WARNING: The following is not a recommendation to buy, sell or hold any financial instrument.
Well, well, well...
It might pay to revisit my
Investing Very Close to Home letter to a Cryptogon reader, written back in July:
I don't see gold being a cure-all, but who knows!? It might go to ______ <- fill in the blank. Consider nibbling the dips under $600? That would be my best guess, if I was forced to make a guess.
...
Oil? It could just as easily go to $45 before it goes to $200. I wouldn't go near oil, long or short. It's far too volatile.
$60 is a critical support on oil; the gateway to $45. Gold has totally broken down. See my
extended piece on the fallacy of gold.
Anyone who is relying on gold for wealth preservation is acting on faith alone at this stage. Any asset with this kind of volatility isn't an investment, it's a gamble.
For the tinfoil hat traders, people with money to burn, gamblers, speculators, and other associated loose units, the following is for you: If the support at $60 holds on oil, watch out for a weird upside move.
If anything happens in the Persian Gulf in the near future, these relatively low oil and gold prices are where the Them took their long positions... before the LIVE BREAKING NEWS on CNN, etc. and Bush mumbling something about Iran and freedom in an address to the nation.
If I was a trader, which I'm not anymore, I would be looking for excuses to be long oil from these levels; maybe the longest, out of the money contracts available, i.e. the cheapest to play. Consider drop dead stops on long positions at $58, rather than $60 because a break below $60 may overshoot short. This theory is probably wrong if oil goes below $58. Again, look for reasons to go with a long bias here.
As usual, it's not easy.
If you look at an oil chart, it could be argued that you're "Trying to catch a falling knife" by going long here. This is doing the opposite of the better known, "The Trend is Your Friend" strategy. But, look at a longer term chart and you might just be "Buying the dip" of a larger uptrend.
This is why I don't trade.
But I smell a rat on this recent downward price action on oil. It's nothing scientific. It's probably not correct. But I smell a rat anyway.
If anything "big" happens, we will see $100 oil within a couple of trading sessions. If there's one thing I've learned in all my years of watching financial markets, the Big Money never chases the move, and They look for (and create) opportunities to make the most money. They're in before the action takes place. (See the
accumulation phase of Dow Theory.) And They're out as clarity emerges, and the public emotion phase begins. Hint: Waiting for clarity is not often rewarded.
If you believe 5% of what
this story says, should oil be trading around six-month lows? Or is this a multi billion dollar set up for the next gap up?
The Pentagon's top brass has moved into second-stage contingency planning for a potential military strike on Iran, one senior intelligence official familiar with the plans tells RAW STORY.
The official, who is close to the Joint Chiefs of Staff, the highest ranking officials of each branch of the US military, says the Chiefs have started what is called "branches and sequels" contingency planning.
"The JCS has accepted the inevitable," the intelligence official said, "and is engaged in serious contingency planning to deal with the worst case scenarios that the intelligence community has been painting."
A second military official, although unfamiliar with these latest scenarios, said there is a difference between contingency planning -- which he described as "what if, then what" planning -- and "branches and sequels," which takes place after an initial plan has been decided upon.
Adding to the concern of both military and intelligence officials alike is the nuclear option, the possibility of pre-emptive use of nuclear weapons targeting alleged WMD facilities in Iran.
There's also
General John Abizaid's recent comments on Iran's capability to disrupt Persian Gulf oil shipments.
In terms of
The Magic Mystery Dot, we could now be in a large scale drawdown phase after the multiple, smaller MMD upside alerts. How long will the drawdown last? Ahh, that's where the "Mystery" comes in.
If all of this seems like incomprehensible rambling to you, that's mostly what it is. If, however, oil suddenly jumps to $100 or more, think about these echoes from the near future that were barely discernible from the $61 per barrel range. I'm putting these ramblings out there in case any of the black box programmers who read Cryptogon (and they do read Cryptogon) are getting similar signals and have anything to add.
posted by Kevin at 8:01 PM