Friday, July 11, 2008

Dear CFTC: About those Oil Markets. And: A Stock Tip

Yesterday's move in oil, adding nearly $4.00 in the last half-hour has me thinking that maybe supply and demand aren't such a big factor. As Bloomberg said in their story "Crude Oil Jumps More Than $5 as Trading Programs Trigger Buying ":
Crude oil rose more than $5 a barrel in the last hour of New York floor trading as prices breached a level that triggered computer-generated buying programs....
...``The market is very volatile,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``There was no big headline at the end of the day.''...

The long-only index investors have created such a distortion in the market that very few speculators are willing to go short, which is one of the functions of speculators in the markets. Now, if you have program trading kicking in, only a fool would take the other side of a buy order. The CFTC has become the Nevada Gaming Commission.

On June 6, I heard that the shorters had their heads handed to them and decided they weren't going to play the game anymore. June 6 was the day the NYMEX had its largest dollar move ever, $10.75 on the expiring contract. A lot of the move was shorts scrambling to cover and get the hell out of the market.

And the stock tip? Buy some airlines for a one week trade. The strongest stocks seem to be NWA and DAL, although LCC and CAL might give you a bigger pop.
Remember though it's a trade. There's a real risk they could go out of business.