Today, we are going to explore the link between Oil and the Markets. I’ve been saving quite a few articles and charts, so this should be fairly comprehensive exploration.
The Big Picture is no "Johnny-come-lately on energy. Recall that we
first became concerned about Oil prices in November 2003 (Oil Prices
Approaching Resistance):
"Crude prices are approaching a critical level; NYMEX Crude has —
quietly — risen 15% since its early Autumn price of $27. Its now
approaching critical resistance at its post-war highs near ~$32.25. If
prices pop over that level, you could see a clear run towards $36-38.
While I expect that unlikely to happen, if it did, it would be quite
problematic."
We got outright Bullish on the sector back in December 2003, picking
energy as our favorite sector for 2004 in the BusinessWeek year in
preview. (One of only 3 who did).
Where does that leaves us? While I don’t believe Oil is a bubble (ala dotcom/tech circa 2000), we are rather extended. That’s why I suggest using a pullback to get long energy names — rather than chasing them.
This chart makes that point explicitely:
click for larger chart
Why all the concern for my historical track record? Lately, I’ve been reading Greg Eckler’s Bull! 144 Stupid Statements from the Market’s Fallen Prophets.
Its made me all too aware of some of the really, really bad pundits who have proceeded me. So I am more than a bit conscious of making sure the record is accurate — While I expect to be wrong, I want to avoid being mischaracterized . . .
