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On Aug 14, 2004, at 4:06 AM, Bob wrote:
Was anyone else surprised at how the indexes held up this week in the face of Oil continuing its relentless rise and some not so inspiring earnings reports? Maybe it's just a pause before the indexes head lower but I thought it was rather odd.
Equities/WTIC oil spreads are approaching areas support (value). Here is a QQQ/WTIC chart:
I suspect funds are unwinding these types of trades...
I also heard a trader on CNBC state that he believes oil is within a week or so of a top, and the reason he cited was the current relationship/spread between the front month and outlying months. This is beyond my area of expertise so I was hoping some others would share their views.
Backwardation is a market condition where spot prices exceed forward prices. Contango is the opposite condition, where forward prices exceed spot prices. The terms are used primarily in certain commodities and energies markets. In the oil market, the prevailing condition may reflect supply and demand. For example, if crude oil is contango, it may indicate a glut of immediately available supply. Backwardation might indicate an immediate shortage.
More info:
http://www.platts.com/Oil/Resources/Risk%20Management/crudeswaps.html
http://www.mrci.com/f2578.asp A seasonal spread with a14-1 win ratio, I wouldn't touch it this year.
Oil is in a parabolic rise and I would expect a full round trip, $28 oil and .80 unleaded gas...
Why? We'll discuss it then...
Bantz, cratering to parabolic means...
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