Investing Information

The high price of oil - investing

 

In less than four years, the price of oil has risen about 300%, or over $50 a barrel. The Light Crude Permanent Bond (of oil futures) hit an all-time high at $67. 80 a barrel Friday, and blocked the week at $67. 40 a barrel. Indefatigably high oil prices will in the long run slow financial growth, which in turn will cause oil prices to fall, ceritus paribus.

The two charts below are same cycle daily charts of SPX (S&P 500) and OIH (an oil ETF, which is a basket of oil stocks). Over 15% of SPX are energy & convenience stocks. The two charts below show SPX happening the current rally about a month ahead of OIH. Also, the charts imply, non-energy & benefit stocks fell over the past week or so, while energy & advantage stocks stayed high or rose further.

SPX held its 10 day MA until just over a week ago, while OIH continues to hold its 10 day MA. The Parabolic SARs (red dots) be a symptom of SPX is on a sell signal, while OIH continues to be adamant the buy signal. SPX would need to rise to about 1,242 3/4 to trigger a buy signal, and OIH would need to fall below 115 3/4 to trigger a sell gesture (see upper left bend of chart).

Perhaps, the safe play would be to wait for OIH to close below its 10 day MA, or fall below the Parabolic SAR buy level. However, I believe, if oil tests $70 (e. g. next week or the subsequent week), that will be the OIH sell signal, and i don't know an brilliant break to buy OIH Sep puts (or puts on overvalued oil stocks).

SPX has sold into weekends over the past three weeks, which is typically bear marketplace behavior. However, next week is options cessation week. So, aim will be rather off-center next Friday. The next are flow Dignified Max Pain expirations: SPX 1,225 with the value of calls about three times the value of puts (which is bearish, since the put/call is a contrarian indicator). SPX congested at over 1,230 Friday. OEX (S&P 100) 570 with the value of puts over three times the value of calls (which is bullish). OEX blocked at about 571 Friday. QQQQ 39 with the value of puts twice the value of calls. QQQQ clogged at about 39 1/4 Friday. It's exciting that the OEX put/call is almost the mirror image of the SPX put/call, which may advocate institutions, which tend to buy large cap stocks, are cynical of a rising stock market.

Economic information next week are: Mon: Empire State Index, Tue: CPI, Developed Production, Ability Utilization, Shop Permits, and Housing Starts, Wed: PPI, Thu: Unemployment Claims, Most important Indicators, and Philadelphia Fed. Fri: None. Current data showed slowing and above trend development with disinflation. A advanced Ability Employment Rate would be a symptom of forthcoming inflation. The high price of oil tends to slow efficient advance considerably than cause inflation (in part, for the reason that the high price of oil is a tax on consumption, which lowers call for for non-energy goods).

The big play may be export Sep puts when OIH and overvalued oil stocks bounce, as OIH may go on to lag SPX. Also, options cessation week tends to be volatile, and the trading range may continue. So, there may be more than a few other exceptional trading opportunities next week.

Charts obtainable at PeakTrader. com Forum Index Marketplace Overview section.

Arthur Albert Eckart is the come to nothing and owner of PeakTrader. Arthur has worked for advertisement banks, e. g. Wells Fargo, Banc One, and First Export Technologies, for the duration of the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the Academic world of Colorado. He has worked on options case optimization since 1998.

Mr Eckart has industrial a all-embracing trading method using economics, file optimization, and mechanical examination to amplify come again and lessen risk at the same time. This line of attack has resulted in first-rate proceeds with low risk over the past three years.


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