Monday Market Meltdown – Oil Fears Spook Investors (again)

By Phil Davis

We should all fear Oilmageddon!

That’s the word from CitiBank, who are SUPPOSED to be the voice of reason in these markets. When Banksters tell us to get out of something – it’s usually time to get in and, this morning, I put out a Trade Alert to our Members (and tweeted here) to take a long on Oil Futures (/CL) at the $30 line (with tight stops below) as well as lines on various indexes I detailed in the Alert.

Of course, we warned you last week that the market would likely turn back down and I detailed our hedges on the Ultra-Short S&P ETF (SDS) at $22.50 and I mentioned we were long on Gold (/YG Futures) at $1,155 and Silver (/SI Futures) at $14.90 and Natural Gas (/NGK6 May Futures) at $2.15 on Thursday. This morning they are at:

  • SDS $23.70 – up 5.3%
  • Gold $1,180 – up $8,000 per contract
  • Silver $15 – up $1,250 per contract
  • Natural Gas $2.27 – up $1,200 per contract

Our one loser (so far) was Copper (/HG Futures), which dropped from $2.12 to $2.075 for a loss of $1,125 per contract. Of course stopping out your losers is important with Futures and we’d be happy to get back in either over $2.10 or off the $2.05 line (with tight stops below).

In Friday morning’s post we detailed two major hedges for the S&P (SDS) and the Nasdaq (SQQQ) using the Ultra-Shorts and, of course, those are both paying off like gangbusters as Friday was already a bad day and the markets are following through this morning. We also detailed a trade idea for Barrick Gold (ABX) to leverage the run in gold – also doing fantastically, thank you! We’re hoping for a bounce but really we’re using our bullish future bets, pre-market to lock in the tremendous gains of our index hedges at what we THINK might be the bottom again at 1,850 on the S&P.

Nattering Naybob had a very good summary of the weeks events, reminding our Members yesterday afternoon of my Wednesday warning that we were simply in a “dead cat bounce” and likely to fall even further this morning, saying:

Some are connecting the dots so the 1859 to 1940 SP500 rally, could be the dead cat bounce we alluded to as the overall trend reasserts itself. I said ES could test 1930 and to wake me up when it got there, where it was rejected in a big way. I have a funny feeling this Super Bowl, Monday and week could all be ugly.

And ugly it is this morning but I’ll be on Money Talk on BNN Wednesday night, explaining to Canada why the collapse of oil does NOT mean the Global Economy is collapsing and I’ll write it down here so you can get ahead of the game and, as Buffett advises: “Be greedy while others are fearful.”

The big problem is that most “analysts” don’t know anything more than they knew in college – especially the ones who wrote books who, even if they now know better, almost never contradict what they have published – no matter how much evidence to the contrary has piled up against them. Those who aren’t slaves to the status quo are often paid by the powers that be to steer the beautiful sheeple in and out of positions as needs dictate and even the honest media loves a conflict – and they’ll present both sides of an argument as valid – even when one side is clearly idiotic.

So, getting back to oil – most people think oil pricing is a function of supply and demand and long-term it is but short-term it’s a function of sentiment and manipulation. We take full advantage of that at PSW and I could give you a dozen examples from every one of our 10 years in circulation but suffice to say it’s not that hard to spot those patterns. One great pattern we observe is the fake, Fake, FAKE!!! trading of oil contracts over at the NYMEX.

As you can see from the 5-month strip at the NYMEX, there are 515,000 open contracts for March delivery and that’s very high, which puts downward pressure on the price because the contracts close on the 22nd (10 trading days, we’re closed next Monday) and, not only are the storage facilities at Cushing, OK (the point of delivery) full to the brim with unwanted oil, but Cushing can only handle about 40M actual barrels of oil per month so there is NO WAY ON EARTH that 515,000 contracts, representing 515 MILLION barrels of oil, can possibly be delivered.

Of course the traders know this and they pull this scam off every month in order to create a false sense of demand for oil and, every month, they whittle their fake orders down to 15-25M actual barrels worth of contacts (15-25,000) and the rests are fake, Fake, FAKE!!! – ALL of the time.

Yes, trading on the NYMEX is a complete and utter fraud BUT knowing it’s a fraud helps up make a lot of money so, other than my occasional rants like this one – we could care less – certainly the regulators don’t seem to… This month, over 3M contracts will change hands at the NYMEX, representing 600M barrels of oil – all so just 20M can actually be delivered to the US consumers. The rest of the nonsense (99%) is just a game to move the prices around with the US consumers picking up the tab for all the fees that monthly churning generates.

As you can see, there are 515,000 contracts worth of open orders for March delivery and, since only 25M barrels are likely to be …read more

Read more here: Monday Market Meltdown – Oil Fears Spook Investors (again)

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