About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, May 21, 2008

Notes On the Oil Price & Stock Market

Oil Price
Well, it blew right through $133 bl. today and is up $7 on the week
to date.The bull side has been out in force this week, disparaging
the idea of a "bubble" or "excess speculation" in the price. The new
mantra is that tight supply / demand fundamentals warrant a
further move to $150 a bl. with an eventual spike to $200. This
view has carried the day recently and has engendered a fresh
regard for the market. My bubble-in-force price remains $170 and
my ignorance of whether we get there remains undiminished.
I would note that the oil price is fabulously overbought now at a
whopping 37% premium to its 40 wk. M/A. Solid trading rules
have been stuffed in the drawer as players join the champagne
waltz. Stretching it, I can justify a price of $80bl. on fundamentals.
Shows you what a piker I am.

Stock Market
The two day tumble for the SP 500 broke the uptrend line off the
March, '08 lows. At its high for this recent rally, the SP 500
kissed but failed to penetrate its falling 200 day M/A. It was also
guilty of wobbling when it broke through the downtrend line from
the Oct. '08 all time high. These are warning signs, although they
are not necessarily fatal. The market's overbought condition is
being rapidly alleviated, but do not be cavalier here if long.

The rapid gunning of the oil price in recent days has folks wary
of stocks because of its inflation potential. Even so, since oil is
sensationally overbought in the short run, equities longs may
need to hang tight until there is more resolution.

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