Oil falls $6 and all we get is a 50% recovery off a 200-point drop?
I guess sentiment is even worse than I thought! Seagate missed (and shows up as a beat in Briefing so now I'm concerned about their data) along with FHN and HCSG today BUT ADTN, CBSH, ETN, JNJ, PII, RLRN, STT, USB, GWW, ALTR, CTAS, CPSS, CSGP, CSX, INTC, PHHM, PNFP, SPSN and VFC ALL beat estimates and almost all of them went up despite generally conservative guidance (only ALTR and CSGP raised guidance, none lowered). So I will say once again – Show me the misses!
If you run the charts on these you'll see that the truth of earnings is indeed setting these stocks free, at least for a day and this means my crazy plan to buy into earnings is working, albeit badly so far – as anyone not actually reporting good news is taken out and shot. I will put it to you that the guidance given by these companies is wrong – if oil keeps going down then $21M per day per $1 per barrel of price comes back to this country and goes back into the hands of American consumers. Yesterday's $6 drop paid paid for 630,000 IPhones at $200 each and over a year represents $44Bn in savings, not even accounting for refining mark-ups or food and other inflationary dominos.
We've been hoping and praying for a break in oil for months and it can and will save the economy when it happens. I'm sure tomorrows CPI report will be just as awful as the PPI report with oil jumping from an average of $123 in May to $135 in June, taking $7.5Bn out of the pockets of US consumers. That ($7.5Bn x 12 months = $90Bn) is 1/2 of Bush's stimulus checks stimulating nothing but the price of oil with the other half going out the window as oil climbed another $10 this month. Perhaps if Bush and Ben helicopter-drop some more cash we can afford $150 barrels of oil this summer…
Oil prices officially finished down 4.5% which, according to our 5% rule, indicates more downside to come. Off the $145 top, we see $137.75 as our critical resistance and oil bounced off there a couple of times mid-day before traders pulled it together at 1 pm and jacked oil back up to $139.37 in the last 90 minutes in much lighter trading than they had in the morning. Over 50M barrels worth of contracts were rolled away from August, canceling the delivery of 50M barrels into US inventory. There is still a "demand" for 154,516,000 barrels in August but, by Monday, at least 110M of these barrels will be dumped, much like a perverse Boston Tea Party, denying US citizens the delivery of barrels we already paid for.
In our NYMEX Tea Party, the traders are the ones dressed up as Indians, preventing oil from coming to American shores and causing chaos in the markets, as they have done every single month for 4 years – Yet no arrests are made! For the record, the barrel count (and these are barrels that are under contract for delivery) for this year's strip is 154M for August, 280M for September, 93M in October, 68M in November and 179M in December. Let's track the fun as 500 NYMEX traders spend this week dumping 110M barrels of oil back into the sea, once again denying 300M Americans the fuel they need and driving prices to levels that are easily twice what they would be if this shell game were put to an end.
Don't blame the dollar for the drop in oil, it tested 71 today and finished down at 71.79 as Bush, Ben and Hank inspired negative confidence in the markets. I say it often and I'll say it again, we do not have an economic crisis – all these things are fixable – what we have is a crisis of leadership, possibly the worst in US history and never before have so many been led so badly by so few.
Of course tomorrow we are expecting a 5Mb draw in inventory as the NYMEX crooks shorted Cushing 20M barrels at the close of last month's trading and, as I've pointed out before, it immediately showed up in a daily decline of 700,000 barrels of imports. So now we are importing 700,000 barrels a day less and we are sending 1,444,000 barrels of product a day out of the country (see yesterday's post) and still, there is a build in refined products because demand has fallen off the table in the US but it's all deny, deny, deny by the oil apologists at GE/CNBC.
As with housing, which was also pumped to extremes by GE/CNBC as the parent company raked in Billions in profits in it's home lending division and was on the hook for billions in losses when that bubble popped, a bubble can only be kept alive for so long, no matter how much the pumpers wish it were otherwise and this oil bubble is indeed ready to pop. We have to remember though, that the housing bubble was "over" for almost a year before it finally showed up in the numbers and, while the current commodity bubble is twice as ridiculous as the housing bubble was (because, at least there were people who wanted expensive homes), it is also being rabidly supported by a lot of powerful people.
So let's not jump the gun but let's look for another negative or lame reaction to another big draw in crude tomorrow, the crooks know it's BS, just like they knew last week when cude fell $1.50 after announcing a 5M barrel draw we had predicted on June 22nd but seemed to baffle "analysts" who were expecting a build and no one in the media seemed to understand how oil could go down on that report. Tomorrow is Grand Theft Oil II and we'll see how that goes but another sell-off, especially one that isn't followed by mega-pump into the weekend like last week, will give us some real hope.
Best case scenario: Lots of earnings beats, oil falls and money rotates out of the sector back into Tech and Transports, which retested the 2,300 mark yesterday for the 3rd time since March. We came off the March lows to jump 20% in the transports and the Dow gained 1,200 points (10%) DESPITE oil rising from $100 to $135 over the same period. If we can get oil from $135 back to $100 – we can expect a very, very nice recovery.
