Uh, I have been watching DUG the past week or so and haven't got it figured out.  How correlated to the price of oil is this vehicle?  I noticed two times that when oil spiked to over $135 and you would think DUG would lose, it actually gained over two percent.  I am not sure what these Djusen Swaps it holds are.

Good luck, Dan

Just a friendly reminder to those thinking about shorting the price of oil, in one week we enter the official start of hurricane season.

Norbert mentioned Market Vectors Russia (RSX) which is certainly one way to target Russian oil and natural gas stocks. My concern is that if the price of crude oil should reach the "demand-destructive level," the impact it would have on this fund. On the other hand, RSX also provides exposure to major natural gas producers. I am wondering if Market Vectors Coal (KOL) would be a smoother ride. KOL provides exposure to metalurgical coal as well as mining equipment manufacturers like Joy Global. Any thoughts?

Playing with the charts, here's WTIC, $DJUSEN, and their relationship.  CHART.

Given how  WTIC has essentially gone parabolic, the sector is trading above the top of range, and the relationship between WTIC and the sector prices is just short of an all-time high, it's clear that a correction is possible.

However, I'm shy about shorting something that has a long-term trend as strong as this one.  The ability of a chart to become even more overbought might exceed my pain tolerance as I watch my shorts bleed while on vacation.  I think I would see a correction of $DJUSEN back to its trend line as a gift from God permitting me to add at a safe resistance level - not as a break in the long-term trend.

I note that our Grizzly Short fund is 32% financial services, 13% consumer services, and 1% energy.   It's better to think like Leuthold or Soros or Boone Pickens - and not like Rambo - IMHO.

The latest EIA Short Term Outlook report is out.  It's HERE and there's a lot to ponder.

Here's the latest global consumption forecast, which shows a 2008 US dip, but not 2009.  At least the Chinese growth rate is not increasing going forward:

The non-OPEC chart is also very interesting in terms of seeing where new production is coming online - and where it's going offline.  No wonder that the Brazil, Canadian, and Russian stock markets have been setting new highs!

 

Aside to Closer:

The RTS just moved about 15% in a few weeks up to the top of trend channel.  IMHO RSX or any other Russia vehicle should not be touched here.   Again, it's just my opinion.

Here a CHART for the RTS. 

I bet we'll get some kind of growth scare or something over the summer.  Maybe then? 

closer:

I am wondering if Market Vectors Coal (KOL) would be a smoother ride. KOL provides exposure to metalurgical coal as well as mining equipment manufacturers like Joy Global. Any thoughts?

I held KOL for quite some time and had a good ride, but coal is very volatile. I'm going to get back in after a pullback. But right now, with the general market down, I'd rather be hiding out in cash.

By the way, did anyone read that Senate testimony I posted?  Some senators are considering legislation to close the credit-swap loophole.  If that loophole is really as serious as the author makes it out to be, it could mean the whole commodity complex will come down. 

I'm thinking cash is a good place to be until all of these issues get sorted out. 

AKHalea:

Just want to bring to your attention an FT article about a response from Asian govts in terms of cutting subsidies for oil. This may result in higher prices as fuel price increases are passed on to consumers. This in turn could result in a demand reduction. What I am trying to say in a roundabout way is that we may be in the 8th inning of this particular oil bull, strongly dependent on the Asian country's demand response.

Another factor is that after the Olympics, China may end up suddenly reducing its import needs. It is one of the possible scenarios to prepare for regarding the oil bull .... DUG anyone? ... Anil

Anil --

 I do note that since the announcement of the subsidy cuts the price of oil trading in Asia has ignored it and gone up. Clearly the market seems to demand some proof of some demand destruction before selling off.

Master -- yes I read it and thank you for posting it.

I would tend to concur with you that if this trading was barred prices would most likely fall. However I have no way of assessing the accuracy of the details of the testimony. Nor can I assess by how much and for how long they might fall.

As for the political assessment of whether such legislation could pass, I am somewhat dubious but then again it is an election year and if corn-based ethanol makes sense .... To do so would have profound implications for our open market based system of property rights and seems to me would merely drive the trading off-shore..

I do tend to take Congress's fanfare with a grain of salt -- at least until the market reacts to it. As you may have noticed Congress with great fanfare recently closed the "infamous" Enron Loophole -- of course 7 years after Enron collapsed which was the first clue from the real world about its urgency and importance. On the announcement of the loophole closing the price of oil sold off for 2 whole minutes and then resumed its advance and is substantially higher today. Mr. Market apparently could have cared less. It is fair to notice Mr. Oil Market didn't react to the threat of this legislative change and testimony when it was given.

That said I currently have no commodity based positions other than a small gold position though I do own energy and commodity stocks (miers etc.) in abundance.

DI, I guess I have a more optimistic outlook on regulation than you do. The drop in DBA coincided with the raising of margin requirements for grains and that ETF has never been the same. That's a case where regulation did it's job and quickly. And permanently. Or so it seems. I agree though that we have no way of checking out the guy's facts. But they're easy enough for Congress to find out.

Master -- Actually I parse it a little finer. Regulation often works if the regulators are thoughtful. Your DBA example is a good one and why I took my DBA profits and have not ventured back into it.

Congress on the other hand I see as more like a Witch Doctor -- the show is very entertaining but the patient often isn't cured. Or to use the old cliche "All Fluff. No Stuff".

"Who are those guys?" ----The Sundance Kid to Butch Cassidy.

The strangest indicator I saw this weekend was amidst all the gloom of the Talking Heads the AAII Survey of Small Investors shows 57% are still Bullish. AAII That is nowhere near the below 30% reading seen at the January and March bottoms. Note: In reading the chart remember that AAII Sentiment is a contrary indicator -- that is excessive Bullishness by Small Investors is considered Bearish and vice versa.

I continue to be perplexed how small investors can be so optimistic while consumers are so pessimistic. Consumer Confidence is the lowest it has been since 1992. Where did the AAII survey find investors who aren't consumers anyway?

Mauldin had an excellent article by a SocGen analyst who has developed a system for identifying short candidates in European and the US markets. HERE His technical screen data and methodology data goes back to 1990 and has a good record of identifying profitable shorts. Though somewhat technical in its methodology the punchline is significant. His screen for potential shorts has the highest number of overvalued stocks worthy of shorting in its 18 year history in both Europe and the US.

There are a lot of interesting charts at that link.  The surprise is that the majority of them are unequivicly bearish.  The exceptions seem to be charts that have something to do with interest rates andsome of thos seem to be turning bearish.  If one where to throw in a couple of Hindenburg Omens  and perhaps a cash flow indicator, it would seem to be time to find a bunker and crawl in.  I have already done that in my own way.

uh