WASHINGTON, June 17, 2013 — Having been on a brief vacation with friends last week, we missed most of the market inaction, due at least in part to a lack of connectivity at a rural Virginia retreat. So imagine our delight and surprise this morning, noting Dow futures up a whopping 111 points at 8:30 a.m. EDT and S&P and NASDAQ futures up similarly. That means it’s likely we get a big market open in an hour, although it’s anybody’s guess where we go from there.
Buzz on the Street is that traders are getting optimistic about Uncle Ben (Bernanke) and the Fed’s latest opinings, due out mid-week. Trial balloon or no, the Fed’s recent comments on “tapering” threw the market in a tizzy, according to financial pundits, who’ve noted that the 2013 bull market was and is addicted to the Fed’s printing presses as business itself hasn’t really been all that hot in the last quarter or two.
What’s even likelier for the market’s June Swoon, however, is the fact that Sell in May Syndrome may have arrived a bit late this year. The market’s annual pre-summer vacation dump-fest usually happens in that merry month. But such has been this year’s false market optimism that it took a little Fed jawboning to cool things down, albeit belatedly.
But stock prices quickly progressed from mere cooling to “global cooling” as all markets everywhere plunged with incredible rapidity, with bullish investors cooling off to bear territory even more impressively.
In spite of this week’s apparently optimistic start, check out oil prices which, bottoming only a few weeks ago at near $90 bbl. for West Texas crude, are sneaking up near $100 this morning in the U.S. Brent Crude, always priced higher and used as a benchmark in the U.S. for reasons mostly unknown to the layman, has been averaging at least $10 higher. If you’ve filled up your tank in the last few days, you already know that, however, at least in terms of price per gallon.
We are awash in oil, of course, which makes such a price move seem illogical. However, things have finally begun to reach a critical point in Syria, at least for the Obama Administration, which finally bowed to the obvious after nearly five years of feckless Middle East post-colonial policies; declared the Assad regime to be a really nasty bunch of chemical-weapons-using bad guys; and vowed to get really tough by sending the few remaining non-Al Qaeda-supported rebels a few dozen Banned-in-New York Smith & Wessons to go along with the usual CARE packages of MREs.
In other words, The Big Oil Scare is upon us again, and that’s really why prices are going up. The Obama Administration’s slow roll against the Keystone Pipeline isn’t helping either, as EPA rule makers are apparently looking for ways to thwart the pipeline after the President waits until the last minute to approve it, which is sort of like John Kerry voting for it before he voted against it. But this is worth another column at least, so we’d best move on.
If we rally today, we will likely pull some of our remaining positions off right into it. That would include a couple of small positions we foolishly took last week, expecting a little better rally off oversold conditions than we actually got. People are nervous this month and it shows. So why should we hang around and suffer portfolio damage while others act like idiots?
We still plan to maintain two tiny, tentative positions in gold ETFs IAU and PHYS, waiting for the big players to finish whatever mega-move they began to make sometime last summer, which has been playing havoc with prices for the physical metal. ZeroHedge and Jesse’s Café Américain have been hinting darkly that some of this has to do with there being far more paper contracts floating around for gold than there are actual ounces of physical metal in the vaults. We don’t really know, but this is a market that has remained surpassingly weird for nearly a year now, and we are suspicious as well.
A trade or two might be in order in the oil patch, either via major oil companies or crude oil ETFs. But such trades could be short-lived if the Assad regime decides to “negotiate” (as in “stall for time”), something that Iran continues to master, excelling in a skill it likely learned from the North Koreans.
At any rate, if we enter the oil patch in any way, it’s likely we’ll be back out again before we can write about it.
As far as our readers are concerned, there are only trades in this market at the present time—no investments. So if you play, use stops and travel with caution. The portfolio you save may be your own.
*Cartoon above by A.F. Branco, courtesy of LegalInsurrection.com.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.