Time was a drop like we saw on Thanksgiving in the oil market would have led to 'blood in the streets' in equities. Today though after seeing West Texas Crude drop as much as $6 dollars yesterday after OPEC was unable to reach agreement on cutting production, the larger market is actually up.
What seems to be going on is that some in OPEC-particularly the Saudis-want to protect market share vis a vis the US shale oil and gas boom. They basically said that North America can cut back on supply if supply is a problem. The trouble is that OPEC can't agree among itself. Some of the poorer countries wanted a production cut but the Saudis blocked them.
http://www.cnbc.com/id/102222904
The economic output is hard to predict. The concern is that it will hurt the oil companies and the shale boom-it's been said that many can't be profitable with oil below $70. Surely it helps consumers and businesses that by gas and oil. Welcome back to the land of gas under $3 again for now.
The market itself today though has risen. The oil stocks are getting killed as is the XLE but the retailers and airlines are up. I saw a trader questioned on the trading floor earlier on CNBC and he made sense. Play your sectors right but stay away from oil for now as that market is too dangerous.
I'd be nervous trying to short the XLE now too-until today while oil had dropped from the low 80s to the low 70s, XLE had basically run in place. Now it's down $5 dollars today but is that a 'flush' where the price will stabilize or will it drop further? It's not an easy call based on what we've seen previously. The rest of the market, however, looks good-if you play the right sectors.
P.S. I hope you enjoyed your Thanksgiving. I did-as I Giants fan I still really enjoyed the Eagles routing Dallas that way right in front of Jerry Jones. It didn't hurt that I had a little money on Philly. I told that to Jim Cramer on Twitter and he favorited my tweet! I've reached a new nadir!
What seems to be going on is that some in OPEC-particularly the Saudis-want to protect market share vis a vis the US shale oil and gas boom. They basically said that North America can cut back on supply if supply is a problem. The trouble is that OPEC can't agree among itself. Some of the poorer countries wanted a production cut but the Saudis blocked them.
http://www.cnbc.com/id/102222904
The economic output is hard to predict. The concern is that it will hurt the oil companies and the shale boom-it's been said that many can't be profitable with oil below $70. Surely it helps consumers and businesses that by gas and oil. Welcome back to the land of gas under $3 again for now.
The market itself today though has risen. The oil stocks are getting killed as is the XLE but the retailers and airlines are up. I saw a trader questioned on the trading floor earlier on CNBC and he made sense. Play your sectors right but stay away from oil for now as that market is too dangerous.
I'd be nervous trying to short the XLE now too-until today while oil had dropped from the low 80s to the low 70s, XLE had basically run in place. Now it's down $5 dollars today but is that a 'flush' where the price will stabilize or will it drop further? It's not an easy call based on what we've seen previously. The rest of the market, however, looks good-if you play the right sectors.
P.S. I hope you enjoyed your Thanksgiving. I did-as I Giants fan I still really enjoyed the Eagles routing Dallas that way right in front of Jerry Jones. It didn't hurt that I had a little money on Philly. I told that to Jim Cramer on Twitter and he favorited my tweet! I've reached a new nadir!
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