None of Friday’s stock market action makes any sense, but we report, you decide. Time to nibble at stocks in the oil complex again with Calumet and Valero?
WASHINGTON, Jan. 29, 2016 – As of the noon hour Friday, stocks are rallying hard as bulls try to take the tape back from January’s bad news bears. We wish them luck. After oil, specifically West Texas Intermediate (WTI), took a nice swing up Friday morning, it’s now getting whacked again, courtesy of persistent oversupply estimates plus Iran’s flat-out refusal today to even consider “negotiating” output cuts, just when they’re trying to ramp back up again.
Those fun-loving Iranians do it again
Of course, those puckish Iranians are doing their best to stick it to the U.S. in the process. After all, they’ve finally gotten their phony “treaty” via our Community Organizer-in-Chief’s unconstitutional pen. Iranian oil is no longer being boycotted, the U.S. has given $1 billion+ back to Iran’s murderous mad mullahs and Revolutionary Guard Iron Sheiks for precisely nothing in return, so all’s right in the radical Shiite world.
(Just 357 days remaining in this bad joke of a presidency. Hopefully, the next Chief Exec won’t be quite as bad, but you never know.)
Dabbling in the oil patch. Wish us luck.
In any event, we shouldn’t have been surprised that the Iranians would jump in and squelch this morning’s continuation of oil’s most recent rally. Of course it didn’t help that inventories of WTI and everything else oily are still way too high, at least at the moment. WTI is currently down 13 cents, sitting at $33.09 bbl. after hitting a nifty $34.40 earlier in the day. HFTs must be having a field day. Oil bulls, meanwhile, are once again sinking into a state of despondency. Ah, but the day is young. Who knows where the numbers will be manipulated next.
We’re mostly out of the oil patch, having been badly burned earlier in the month. We currently have small positions in our periodic favorites, the much-misunderstood Calumet (symbol: CLMT), a modest, independent, multi-product oil refinery that operates as a master limited partnership and offers a fat dividend; and the largest U.S. refiner, Valero (VLO), which offers a pretty good dividend itself.
Those panicking in the oil patch seem to have forgotten that refineries generally do quite well in environments like these. After all, when oil prices go down, the raw product costs the refiners less as well. So even if they must sell the refined product at correspondingly low prices, what the heck. They can still retain much of their margin on the end product since they’re not on the hook either for searching, drilling or transporting the crude stuff.
Traders and HFTs (whose computer algorithms travel on hyped up news stories only) just don’t get this and have been trashing refineries along with everything else in the oil patch, which is why we just had to get out for awhile. In the market, we often observe activities that are entirely stupid and illogical. But that still doesn’t exempt us from getting hosed by this illogic anyway, which is what happened to our portfolios earlier in January.
Oil may not yet have bottomed. But we think the $10 bbl. crap prognostications being bandied about by some of TV’s rich talking heads is highly unlikely and only meant to scare oil back down again, making more money for these clowns who are already short and waiting for the overreaction.
At any rate, we’re blathering on about this because until and unless the algorithms change, all stocks are tied to these volatile, wavering and often phony oil prices until they aren’t. And so we have to trade and invest accordingly, which means mostly staying out of oil’s way.
We’re now 15 minutes past the noon hour Friday and the Dow—ignoring oil’s gyrations just to make us look foolish—is up a nifty 250 points, sitting at 16,330.53—a positive 1.62 percent move for the moment. The broader-based S&P 500 currently sits at 1923.53, up 30.17 (+1.58 percent), while the techier NASDAQ is up an equally good 67.50, putting that average at 4574.17, up 1.5 percent. It’s great for the bulls, but—no offense to the Deity—but God himself may not know where we’ll close today, as we could encounter the typical 2:15-2:30 p.m. wave of selling that often comes near the end of the trading day.
No specific trading tips today. A big up day is generally not the time to buy, and this continuing late-week rally is pretty much bound to generate some equal and opposite red ink on Monday or Tuesday of next week, just because. But if things look right at that time, some buying could be in order as stocks sell off for a day or two.
On the other hand, if it’s looking really bearish for early February (today is the last trading day in January), putting on one or two judicious shorts or hedge positions might be appropriate. Right now, we don’t know, though, so we’ll just run some errands and hope the market plays nice while we’re not looking.
Coming soon… the Revenge of the 99 percent
Have a good weekend and we’ll see you next week. And be sure to look for an upcoming article describing our almost brand new Vacuum Theory of Stock Trading. We’ll be debuting our strategy next week: our counterstrike in our new Individual Investors’ War Against the Machines. Stay tuned.Click here for reuse options!
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