As they say, when something goes up on bearish news, it’s probably time to buy. When they weren’t able to push oil lower today on that ridiculously huge build in crude inventories of 9M barrels, and oil actually ended higher, we might’ve found a short term bottom for oil and have begun the bounceback rally. Since oil’s the commodities General, all the commodities from energy to agriculture to metals bounced with vigor today. The commodities (and the companies fund managers treat like commodities- including my beloved McDermott, now in a wheelchair after having is legs cut out from under it) have dropped basically in a straight line since end of June/early July that a bounce was inevitable. Moreover, the commodities and the collateral damage of related names have fallen so far so fast, all so far below their 50 day moving average, 200 day moving average, you name it, that this countertrend rally would likely have some umph and last for a while. (Nucor closed at $52.5 and it’s 50 day moving average is nearly 20% higher around $63!) I’m ready to add to these sectors to ride the relief rally, but keeping in mind the magnificent commodities uptrend of the first half of the year has been broken. Unless there’s reason to believe otherwise, I shall treat this rally as what it is, a countertrend rally in a downtrending market, and sell into this rally.

However, I think there’s a good chance the commodities and their friends can re-take the uptrend. My calendar has just alerted me that Joe Terranova of CNBC’s Fast Money had called for natural gas to bottom this very week and to resume the uptrend began earlier this year. I mentioned this call Joe made in a previous post, where Joe alerted viewers to the natural gas rule of thumb “June highs July lows” at the end of June, telling people to take profits in natural gas right when natural gas looks like it could go up forever, but subsequently took a death dive from above $13 to below $8 in just a month or less. With the brunt of the hurricane season still to come in September and early October, and heating oil demand to drive oil demand in the winter, the coming months are usually bullish for energy. Now we just have to see how the price reacts to this bullish environment. If energy can’t re-take the uptrend in a bullish environment, it’s probably time to get out our parachutes and bail.

Anyway, yesterday was an interesting stabilization and reversal day. Even more impressive given the dollar didn’t fall (i.e move inversely to crude), thus possibly breaking the correlation between the dollar and oil. Looking forward to seeing how this develops!