The Oil Longs are Staging an Exit Play

We stand behind our end game comments of yesterday on oil and gold.  Forty years of trading commodities lead me to suspect that this rally yesterday and today is a staged event to scare new buyers into the market to take over the existing long positions.  There is no new news on which to base this rally.  Probably the oil decline of ten days ago surprised the big oil people and they had no one to sell their positions as prices fell.

Stock market investors need to wait for value, it is not here yet.  Historically, there are some important S&P lows over the past nine years around the current level,  1236.76 on 7/11/08, 1233.66 on 10/22/99, 1219.29 on 6/16/06.  Also 1169.55 on 8/10/01 stands out as a watershed level that generated a lot of selling. 

Yesterdays Congressional hearings were a classic example of closing the barn door after the sheep got out.  Congress had three chances to keep the current problems from occurring; 1)  They could have refused to confirm Greenspan for his second term;  2) they could have refused to confirm “Helicpter Ben” as head of the Fed a couple of years ago; and 3) they could have mandated tough banking laws that would have maintained conservative mortgage requirements rather than allowing banking practice to leverage on top of Greenspan’s low interest rates.

Our Marketocracy portfolio remains short stocks, increased from 30 percent to 100 percent of available assets on rallys this week, and remaining short the oil and gold complex.   The short stock position in dollars is much larger than the commodity postions.  All that said this remains a scary time.

7:17 AM CDT