Looks like more short-covering in the Banks and Brokers.

Comments & Outlook

Yesterday, I pointed you to Suncor, saying that at the cycle bottom for the broad market that I feel will come in the next couple months, traders should be accumulating shares of Canadian oil sands companies, like SU. My reasoning is simple: The US needs oil independency, which can only be done with supplies that are close by and in a solidly pro-American country. Mega-billions are being spent on pipelines that will transport the oil to US refineries along the Gulf coast.

So, please keep on top of this situation. SU has dropped about -8.0% in the past two days, closing at 56.55, hitting a low of 54.06. Write some Dec-08 50 and 47.50 puts, now and over the next month or two. As I see it, the stock is not going back to 45, unless Crude Oil goes back to 80, and your put premiums protect you down to that level.

Unlike Canada, Russia is not so friendly to US political interests, but it too is a massive and rapidly growing market that, with a heavy dose of country risk, is attracting much foreign investment.

Interesting to me that Blackrock, Mackenzie Financial, Van Eck Funds and BGF Emerging Europe and others are buying heavily into Russia's biggest oil producer, OAO Rosneft (ROSN.GB). The stock price zoomed from US$6.68 to $12 in three months recently, later setting a high of $12.33, and is still hanging in at very high prices, with heavy volume.

Rosneft is a vertically-integrated Russian oil and gas company headquartered in Moscow, with upstream and downstream operations in each of Russia’s oil-producing regions. Rosneft operates ten oil and gas producing enterprises across Russia and is involved in over ten world-class exploration projects. The market cap is apparently $114 billion (see www.adr.com). The stock may be hard to buy for retail accounts, and so I will not write about it further.

I note that the Russian Federal Anti-Monopoly Service has brought lawsuits this week against LUKoil, Gazprom Neft, TNK-BP Holding, Rosneft, and Surgutneftegas over alleged monopoly abuse, which pushed up wholesale prices for jet and diesel fuel in Russia.

Everybody is screaming about the high price of energy, but it is coming down now to facilitate a summer rally in the global equity market. This is the time for traders to be watching the Accumulation Zone stocks for Buy Alerts. A couple days ago, my Cara 100 tables started popping up such items, and yesterday the prices started to zoom.

Day traders and short-term oriented swing traders will play this rally. Last week, if you recall, I noted that the markets were way over-sold, which was a warning/alert to those holding short positions. You had the opportunity to cover.

You also had the opportunity to switch out of the Energy and Basic Materials sectors when they were strong and I was recommending selling into strength. Exxon for instance was one I repeatedly discussed as a candidate to sell in the 94-95 level and buy in the 70’s. You had that chance in April and again in May.