Terrific Tuesday – Markets Recover into the Break

Today will be even more meaningless as the US Markets close at 1pm for the July 4th holiday.

Wheeeee, what a ride!

I told you there would be lots of action and we had it all yesterday already – from 24,450 at Friday's close to 24,050 at yesterday's lows and back to 24,450 this morning – see how meaningless Mondays are? Today will be even more meaningless as the US Markets close at 1pm for the July 4th holiday, which is expected to be a huge travel weekend, with 47M people expected to travel for the holidays – 2.1M by plane!

That's the most in 20 years but only really a 1-2% increase over last year yet gasoline (/RB) is selling at retail for $2.87 per gallon vs $2.28 last year so up over 25% despite there being just as many barrels in storage this week (241.2M) as there were last year (241.0M). This is complete and utter nonsense and we feel prices have been manipulated higher and will correct after the holidays.

In fact, speaking of manipulation, you can see from the EIA Report last week that these bastards EXPORTED 3,088,000 barrels of Refined Products (gasoline) PER DAY last week – effectively stealing 21.6 MILLION barrels from Americans and creating an artificial shortage in this country to drive up prices – WHERE IS TRUMP ON THAT???

It's too scary to short Gasline Futures (/RB) but we do like shorting Oil Futures (/CL) as they test the $75 line (with tight stops above) and we're also using the Ultra-Short ETF (SCO) to short oil with Sept $15 calls we bought for the Options Opportunity Portfolio for net $2.10 (we bought back short Sept $18s we had sold as a spread) and now they are $1.65 so we're going to take the OPPORTUNITY to roll them down to the Sept $13 calls at $2.75 to put us $2.30 in the money for $1.10 more money. If all goes well and oil moves back below $68.50, this Ultra-ETF should pop 20% to $18+ and we'll collect $5 back on our net $3.75 entries.

Keep in mind we're using tight stops on our Oil (/CL) shorts over $75 so a $200 loss on an 0.20 move against us is our maximum risk while a drop down to $68.50 would be a $7,500 win so I very much like the risk/reward profile of shorting oil. Unfortunately, there's a lot of cross-talk between OPEC, Iran, Libya, Russia, et al and the prices have been fluctuating wildly but the overall premise is that demand simply isn't there to support this kind of pricing.

Non-oil news this morning:

Trump thinks he's "winning" the Trade War because Chinese stocks have been diving all year, now down 22.5% from the January highs but he's simply a boxer who landed the first punch or a wrestler who just clobbered his opponent with a chair while the ref wasn't looking (and he's already threatened the ref by threatening to pull the US out of the WTO) but he's walking around the ring shouting how great he is while his opponent recovers and gets ready to counter just as viciously.

Meanwhile, looking at the above news (and don't just go by me – read ALL the news in the WSJ or the Financial Times – both of which are considered "Trump Friendly") the question is: Is this the kind of news you should be reading with the market at record highs? This is the news of a World in turmoil that is full of uncertainty – not the news of a bull market about to make a record run.

I'm just saying – be careful, please.

And have a fantastic holiday,

  • Phil
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