From this traders perspective it’s a muddy market right now.
Pockets of strength here and there with a slight bias to the upside but no real trend yet taking shape. Markets like this are like going on a treasure hunt in a minefield! One bright spot though has been the washout of sentiment in the oil stocks. Three weeks ago we strongly urged caution on the oil stocks.
Since then the average oil stock is down between 15%-20%. We’ve seen the commodities broker giant Refco blow up and the whole street go negative on oil. The commodity itself has gotten beat up and was down almost 2 bucks yesterday to $60 and change. It feels like the entire oil story evaporated. What happened?
Hype, that’s what happened! Just like the tech stock run of the 90’s we saw lots and lots of hype which led to boom bust market cycles. I remember getting my lunch eaten by Texas Instruments in 1991. I was 19 years old and owned a ton of the stock and was a huge bull on semi conductors.
Being the green horn I was I had no idea that I was buying at the top of the most recent market cycle! As soon as Saddam’s tanks rolled over the Kuwaiti border my Texas Instruments stock price started to melt like snow in spring time. It was ugly!
I had clients cursing me, closing accounts and just generally freaking out. These were the same people that just a month ago were my best friends when we were making money. I couldn’t understand it. Couldn’t they see that this was just a temporary setback on the path to a 20 bagger stock? That Saddam Hussein had no bearing on how many computer chips Texas Instruments would sell?
Looking back on those times I can see how naïve I was! It takes real guts to hang in on a position for the really big money and sometimes the market will make you think that you’re a fool. But I’ve learned that the market is a harsh mistress and she doesn’t roll over easily for any one. You’ve got to be willing to buy when others say sell and be able to sell when other say buy.
Oil may gyrate around here a little bit which will churn the oil stocks for sure but now is the time to start buying oil again!
Chief Investment Officer
ETF Master Trader