observations and comments on postings etc.........a simple explanation as I see it , to help others (draft based on Friday etc)
HOU and I expect DXO are a mix of present and near contract and the next month's contract
The ratio of months weighting shift during the month to provide stability
I note that HMU and z:DXO both went down today ( HOU - 4.2% DXO -6.7 % )
Anyone moaning that DXO also was down?
Now if you find a NYMEX page etc you will see a table with all months
Now the APR MAY JUN months all moved slightly down today and together
This ( group trend) is what you are really trading
It represent a balanced view of oils value
Now what messes one up is this
The expiring contract ( is closest thing to a real spot price )
BNN was bad as they showed March and should have April if not both
An Analogy
Milk in the store is say 2.00
Yet another service that brings bottles to your door shows up
" I need to sell this as it goes bad soon ( no place to store)
You ( me ) have a fridge full.
Look I'll pay 1.50 and find a place or consume
OK a deal ( example of extreme Contango ) - no place to store
And maybe you get a doughnut thrown in - mmmuuummm doughnuts )
Later he goes to next house and resident says I just happen to be low on milk
right now , - I'll pay 1.85
Yet HOU DXO are ( stay ) based on the stores delivered price ( over a few days average of 2.00
which swings from 1.95 to 2.05 but in a downward trend)
So note that the doubles try to stay away ( roll out) from the expiring contract as it is an aberration
SO now when the expiring spot comes closer to the next month then that is an
indication that the bottom is close ( ie small/normal Contango )
So a spot move from 34 to 38 is aberation of the day
Yet the April was down , what about 30? cents , in the $42 area
so z:USO and z:OIL were down and so were HOU z:DXO
And note WTIC continuous contract is in low 40's as is Brent price
So watch to see if "real" oil drops below 40 or expiring spot comes up to 39
In the real world
What do you think oil will be
in 3 hours 3 days 3 weeks 3 months ( higher or lower) My new rule of 3's !
And for most people Wait for an extreme dip or a firm base and then turn
- in doubles/ultras
And the comment that contango will // would "Reverse" is wrong
( it will "Shrink" )
A small contango is the norm - represent storage costs
I will only reverse at the top ie it would have gone into backwardation when oil was at 147
meaning a fall is ( was) coming
And note if oil moves from 40 to 60 by Sept then
HOU can only move from 5.20 to about 10.40 ( likely a little less)
GW understand that you lost money because you were wrong on your timing and
the direction of oil ( calling a bottom )
Caldwell shows some insight about a downtrend and erosion!!
Definitely a master of gr 6 math _ a good thing !!
( although he calc'd from 35 to 70 for 200% try 41 and up - see above)
Methinks its time to put GW on ignore- One wastes too much time reading his immature moaning
did ignores move from 65 to 75 ish ?
At least your shared list of portfolio picks shows some insight
( and that you are not really a forlourned pigeon).
So at least world of the web allows ignores -which I dislike using
Also I'm surprised ( that we haven't any post from ) Tgar etc on the obvious futures play:
The Spread
You buy a near contract and short the distant one. Close out as they converge just
before expiry or need to deliver .Same idea as renting a ship to store oil.
I recommend one use notepad to prepare ( and edit )and save posts and then paste in.
Also one can just repost ( info ) later for newbies who are too lazy to read the thread
( and I just noticed Tgar plans to repost via links)
Also note
Shorting HOU is good due to the shrinkage and re-set that Caldwell points out
Yet you then need margin ( account )to hold a short and cannot short in an RRSP
Hence the reason for the "Downs"
Also the high Downs have trading room , the low HOU not worth commissions to many
( the main reason we see rollbacks ( if/when HOU is 2.50 )
IF you're a good trader, best to do in RRSP and now the TFSA
Agree with specboy on attention span today
Started 25 years ago with video games quick response no thought
Also explains why so many post rapidly without thought ( see editing in notepad)
Gets so only those who have to do long university assignments learn to analyse
Also reflected in the crap tv "reporting" etc - no depth and now extended by all the
bloggers who just repost some else's poorly prepared comment or unresearched opinion
All a big time waster
Tgar I greatly support his honest efforts to inform but then I find he goes on a tangent of
correct but sometimes( timewise) irrelevant comment at times ( say a few weeks ago ).
Yet now is has improved , and he is getting focused and clearer.
Nice to see a shift this Fri evening to positive (ie links offered) from day's negative
Why have I not lost on HOU?
Because I didn't think oil was at a bottom and I didn't buy ,
(since a trade in Oct) it hasn't turned.
No need to reprint a rule of the Obnoxious Gartman
Specboy misses reason for gold
At moment deflation looks in vogue ( no workers have money etc )
Yet the huge increase in money supply ( many countries) will be in effect as recovery starts (10 months)
then T bond rates will climb then inflation will kick in, salaries etc , then gold will move
past say 1100 (But may be flat for 6-8 mo first imo ) Also economies will improve and oil will be up
Yep time for immature whiner GW -goes on ignore -totally wastes my ( our ) time. -DONE
( He offers nothing ,just whining- recommend you all save reading time and put him on ignore)
He equates unethical syndicated subprime MBS underwriters and over-leveraged hedge fund managers
with futures and day traders. No conception (ahh feels good- less time wasted)
Tgar I'm surprised you haven't put him on ignore already. ( isn't your time more valuable?)
If GW sees enough ignores and no responses he may leave! But doesn't really matter if he's on ignore.
Now the only problem with shorting HOU is that it is likely too close to the bottom
So you either buy HOD and hope oil dips a little more or just WAIT for oil z:OIL and HOU to really
base ( and contango shrinks to a normal spread )
It could be 2 weeks or 4 months
Franjo I think you mis-heard --I think Amanda say Horizon DID make the switch
( and in effect tacitly saying that the March contract was poor to show on bnn )
( as so Horizon coming on ( again ) to discuss as (per this thread) people don't understand HOU HOD)
Hurricanes? Hurricanes?!
H Season is late June to late Sept with worst after Labour Day and affects N gas more
Although typhoons ( Asia ) are a different time of year
So Leon -- right - Baltic dry may indicate about time to buy shipping
( but maybe wait for a double bottom in ship stocks) .I watch 3 picks by Fitzgerald brokerage NYC
Maybe find another shipping index for liquids and post.
But is oil ship idex likely distorted ( based out ) as unused ships are being leased for the extra oil storage right now.
Just a thought - if you watch $WTIC on
www.stockcharts.com ( and use Gallery view),
you can get a better feel of when oil will turn up
It is a "continuous contract" ? only updated at End Of Day
Likely reflects the "solid next month" price
( couldn't find a Brent chart there , which would be good to track also)
Better get this posted
Good Investing All
Regards