Category Archives: USO

SPY Warning Signs

SPY Troubles Ahead

The following are a few of the futures contracts I watch:

SPY Warning Signs

As I’m writing this the SPY is falling and Gold/Silver/Oil futures are rising. I’m reading this as a warning sign for the markets. I spoke about the VIX recently, here.

One explanation for this divergence is inflation. Central banks are printing, cash is being hoarded, the dollar is rising and corporate profits from europe are therefore vanishing. Add Greece debt to the mix and the strong possibility that they default, you add the inflation worry to the list and talking points for politicians, media, and market watchers.

Now take gas prices which are starting to come up as an election issue, even a war issue. Frankly high energy costs are a good excuse for the market to pull back, don’t forget that the media will be playing this up, mixed with war mongering, and as an election issue that’s low-hanging fruit and an easy way to scare off the recent retail investors market participation.

As a trade idea a SLV 40/50/60 butterfly at Jan expiration is one I’ve written about here and I still think this is a very prudent trade. Keep a close eye on USO as well.

Good trading.

Iranian Nuclear Oil

This very public Iranian fear mongering, being played out as a populist form of press release tennis, has been played out over and over, ad infinitum. So much so, that I start to ignore anything “Iran”. It’s a question so politically charged, so Washington lobbyist rich, that I’m skeptical of a manipulated popular press sorting out much truth – even with the best intentions. So for fun, I started to imagine “The Scenario” and wonder who really benefits from this political tennis match. I was surprised by my conclusion.

The current match plays out against an Arab Spring, and “coincidentally” comes to a crescendo with a release from the IAEA. (Here’s the full report.)

Center court started to get interesting in late September when Mahmoud Abbas puts forward a bid for Palestine to be given full membership to the UN. Abbas serving first, into the sun. (The BBC)

Then in early October we learn about a plot by Iran to kill the Saudi Ambassador in Washington. That was a strange one. Hillary Clinton lobs a few deep center court. (CNN)

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Market Opening

I’ve been watching Europe disintegrate into todays open. The CAC40 is off over 4%.

Initial Claims, PPI and Core PPI came in worse than expected. We’re in for another volatile day. If the day gets worse before it gets better might the VIX hit 40? I’d like to reiterate my post yesterday. USO will be weak this morning, Oil Futures are 2% lower into the open. I’ll be looking to add to this short position at some point.

My September SPY butterfly which I disussed here, might get sold today. Some trades you really “like”, this is one of them! And my exit strategy wasn’t clear, it was a long shot when I bought into it. It has played out well, and I’m trying to figure out the best way out.

Libya a Headline Risk?

Libya has the largest oil reserves in Africa and very ‘under-exploited’ (so I read here…) 95% of it’s export earnings are dependent on the hydrocarbon industry.

In February Oil prices rose with unrest in Libya and the risk of contagion in the region.

Current output is at 100,000 bpd, pre-war output was 1.6 million bpd and globally oil is under pressure as global economic weekness threatens demand.

The question I’m asking: Will the departure of Muammar Gaddafi generate additional downward pressure on the price of oil? That day seems to be approaching and presumably supply pressures will be reduced as Libya rushes to get back online.

Granted, it might take many years to return to pre-war output levels but we’re approaching a resistance level and expecting “liberation” any day now. Might this not add to supply, at least in the eyes of mainstream media? Might reconstruction progress faster than expected? I’m positioning for weakness in $USO.

The ETF I follow is United States Oil. $USO.