How many times have you heard that it's going to be different this time?
Do you remember the dot com bust? Well, that was supposed to be different and look what happened. Same with the housing bubble, that was supposed to be different and look how that's turning out. Both events created the illusion of madness that made everyone rich on paper for at least 20 seconds.
The fact is, it's always different "this time", that's what makes it different.
But it's different this time in crude oil, right?
Okay, I know, I have heard all the reasons why oil is up, we are running out of energy, India and China are buying, the turmoil in the Middle East, etc, etc. Let's face it the energy market is the market du jour.
But it's different this time in crude oil, right?
I have to say that it's always different and at the same time it is always the same, only the names of the players in the markets change. It's all speculation (ooh, dirty word) but the reality of the situation someone is always left holding the bag.
The irrefutable laws of the market never change:
Check out my new crude oil video after you have read the six steps.
Read on and understand why.
SIX STEPS and the IRREFUTABLE LAWS of the MARKET
What Every Investor and Trader needs to know to Succeed in the Markets.
Step 1: A move begins with the sponsors (smart traders) who have insider knowledge as it relates to a particular stock or market. This information will move a market up or down depending on the insiders' information. These buyers are smart, very smart, and recognize trading/investment opportunities very early in the markup cycle.
Step 2: Days, weeks, or sometimes months after a move has started, there is a brief mention in the electronic media (radio, cable, TV) or on one of the internet chat boards that a market has moved. The public hears for the first time and begins to get interested, but does not buy.
Step 3: A blurb of information appears in print media. The move also begins getting more exposure on blogs and internet message boards. The public starts paying a little more attention, and will buy a little bit.
Step 4: Wall Street and LaSalle Street brokers go into full hype mode and hawk the market to their customers. The public begins buying in greater volume.
Step 5: A full-blown front-page article appears about the particular stock or market in one of the major financial newspapers, magazines, or financial websites. This is often six months after the fact and after a market has shown its greatest appreciation. There is often heavy public buying, even a possible frenzy, as all media, brokers, and so-called "gurus" start to tout the market.
Step 6: As step 5 gets underway, the sponsors or smart traders begin to move out of the market and take their profits off the table.
The finale Step: The move ends, the market falls, and investors lose money.
Does any of this sound familiar to you? If it does then you know the key rules of engagement in the market. If none of this is familiar to you then learn to recognize these six step asap. Your financial life depends on it!!
Think about it.
11 thoughts on “Crude Oil it's different this time ... or is it?”
Woohoooo!!! It's so nice to have been short the USO 🙂 I covered a little today, but enjoying the ride down!!!
To all the chicken little doomsday talkers: nonsense. The equity market has bottomed, the economy will bottom this quarter (as we cycle the begining of the mortage crisis which hit full tilt in August 2007 -- year-over-year comps will get better and better). The economy hasn't felt a hicup here in TX -- too much media focus on CA and FL and NV, where the mortgage speculators played their games -- but the rest of the US is much better than anybody understands. Profit from it. Get long financials (UYG).
As a silversmith I have watched the metals markets with unusual interest of late, since the inflationary spiral has obliged me to issue two new pricelists in as many years after price stabiloity for nearly twenty. A friend who made a respectable amount in commodities starting from scratch in the 70s once told me that the thing to remember is that 80% of investors in such markets don't know what they're doing, so all one really needed was to be in the other 20%. This said, I will be happy when the current frenzy turns to some other commodity, say molybdenum. The only good that comes from me of there being commidities trading at all is that my suppliers can buy futures to assure that they will have the metal to sell to me and other actual users when we need it. Otherwise, it's just a bunch of people meddling in the business of those of us who actually have to use the stuff -- or in my case, hold off on buying until whatever bubble is presently inflating bursts and then get in there and place my modest 100-ounce order right after the dead cat bounce -- and I wish they'd find some other sandbox to play in.
So your prediction is an oil price crash??!!
How about tanking production in Mexico, North Sea?
How about delays in major projects like Thunderhorse in GOM?
How about major companies pouring BILLIONS into DIGGING oil out of the ground in Albertan tar sands, rather than investing in nice conventional production somewhere?
It seems like you're saying that one should entirely ignore the real supply and demand issues. Prepare for higher oil prices because they're coming.
Thanks for your feedback. No one is saying all those fact don't add up. We are traders and prefer to go with the tape and not fight the current trend in Oil. One old market adage is "They slide faster than they glide."
Every success in trading.
Thanks for the Info, Nothing like good advice from one who knows. Thanks Scotty
Oil speculation?? i think you should spare us your 'wisdom' and stick to your trade triangles. All essentials are going sky-high and the dollar is tanking..Have we seen this before? NO, we are seeing a meltdown the likes of which we have never seen before. Hang on to your boots guys and gals and disregard the junk coming from traders. Buy gold, stock up on essentials..doomsday is near
Nice post Adam,
What many might like to know too is that the smart money prefer lots of liquidity at those times of accumulation and distribution (i.e. bottoms and tops), otherwise their attempts to do so mark up or down the market creating unfavourable prices. What better way to create this liquidity than to create a frenzy.
At tops, good news, at bottoms bad news.
It is not just oil. All commodities are in a gigantic secular boom that has all the earmarks of the early stages of hyperinflation. Even things like lead, tin, and many others that don't have futures markets. The reason is that the money supply is being exponentially grown by the central bank in order to bail out all the mammoth financial institutions. Consumer debt is at the highest ratio in human history and defaults everywhere cause the government to step in with freshly printed money which devalues the dollar. It is not that we have a commodity bubble, but that the supply of dollars is growing out of control which leads to its devaluation and the inevitible push up in ALL commodity prices. Those who short into these markets will pay a heavy price to learn this lesson.
Everyone who wants to buy low and sell high is a speculator--that's all of us (unless you're going short). One big difference this time around is the ETF's. The rules change and only those in the know make the dough. How many times have you seen a regulation change and the regulators quit the government and become "consultants" regarding the new rules they just made? About the best you can hope for "is to die in your sleep" when the game is rigged. EDY
It is often said that the less information available in the market, the more imperfect it is and so the greater potential for profit for those with that valuable information.
So the question must be: how much of the potential conflict in the Middle East over the Iranian nuclear enrichment has been priced into the market for crude oil?
Has the market assessed the impact on supplies if there was a supply cut in the Straits of Hormuz, or has this not been factored into the present Nymex WTI benchmark?
This question I guess also applies to the spot price of gold, seen as a safe haven in troubled times and a secure alternative as inflation surges, following the credit crunch and banking crisis in the US.
All too familiar a number of years ago a stock (ISON) was being hyped by the media and I violated one of my general life rules: do not snap at things. I snapped at that shiny spinner bait and lost, fortunately not a huge amount of money went away. I still have stock in the company but I couldn't buy a soda pop with its value.
Northern pikes snap at lures and get filleted.
Your analysis gives, I agree, a clear picture of how inside guys build up a hype and profit.. But aren't there also, shortages of material which develop for other reasons? Copper, grains for food, you could name more than I? Big question for me still is: Does oil price situation represent one of the above, or both, ? And if the hype is overbought, as your piece suggests, is now the time to sell oil-price based holdings? Them's the big apples !
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