Crude Oil futures this morning are softer at 125.99, down about -$0.78/bbl,
while the DJIA futures are up about +10 to 11590, and both have been consistent
through the past few hours.
Comments & Outlook
Lots of earnings reports out today. Should be interesting. I am particularly
keen to look at the unit sales volume at Exxon (XOM).
Also on the oil industry front, yesterday Goldman Sachs forecast a $145 oil
price at the end of the year. I think that is a reasonable call. Between now and
then, however, the price is likely to spike down to $100 or thereabouts.
Most on my mind today is the massive shorting and short-covering that is
going on in the market these days. Yesterday, there sure was immediate
short-covering after a strange and surprising gasoline inventory report was
issued.
I got to thinking that maybe the SEC will rule against the ‘temporary’
short-selling in oil and silver (LOL) or is that the job of the CFTC (another
LOL)?
Immediately following the 10:00am ET publishing of the surprising decline in
US gasoline inventory for the prior week, traders who were short oil and
precious metals contracts rushed to cover. Prices spiked for a couple hours. Crude Oil
contracts rocketed from just under 121 to just over 127. Silver contracts shot
from 16.85 to 17.59 in what could be described as a silver moon shot. Gold jumped from just
under 895 to 910. All in a few minutes. Almost all of it short-covering.
So what happens if and when next week’s oil inventory estimate is a
‘surprising’ increase? Obviously, the short-sellers will return, and the prices
will dive.
The market has become a casino. How else can one describe it? The house (Wall
Street and Washington) is doing all it can to attract the high-rollers. Why?
Because they are in trouble. Not the high-rollers, but the house. It has become
a house of cards in many ways.
Regrettably, traders either become day traders or they stay away or they turn
to money managers. If silver can rocket +4.4% in a matter of minutes based
entirely on a dubious government agency estimate of the amount of gasoline
inventory in storage tanks across America, then obviously the doctor, lawyer,
business person, factory worker, construction worker, farmer and the rest of the
hard working Americans will miss out.
