Sept. 8, 2005
Spot Crude Oil (October contract) has dropped about $6.00 in the last six trading days and we are taking profits on our short positions. While I believe Crude could immediately drop another $3.00 to $6.00, in the interest of becoming more of a "trader" (as requested by many of you), we are taking the money off the table and will be sidelined in this market until/if some sort of rally occurs to sell into again.
Copper has been beating me up for months but I still believe maintaining a short position here could pay off in a big way.
This market's response to Katrina's devastation has been strangely "anemic". When considering the reconstruction to take place on the Gulf Coast, one would have expected copper to explode further to the upside, yet it is now down roughly 7 cents from its Sept. 2nd high (This is a bull market isn't it? Or could it be it has been?)....I may be proven wrong yet again, but when a bull market responds negatively to bullish news, this many times can mean the move is over, and ready to potentially reverse in dynamic fashion....
Look at it this way....Every market that is going somewhere needs ongoing events to stimulate further buying or selling in the direction it is traveling. In all bull markets, you generally finally reach a point where EVERYBODY who would be "in", already is "in" (and many times, up to their eyeballs), and there simply are no further buyers to propel the market higher, no matter what the news....As/if the market begins to slip, many times you have all those people who are "in" become a little nervous and begin to "sell some", which further weakens the market....which makes for even more anxiety, which can then result in somewhat of a snowball effect and the bottom falls out as, you've heard this before, "everybody tries to go out the door at the same time"...and prices REALLY plunge....I do not know if this will be the case with copper but with this market into all time highs, I do know the potential is certainly there.
I am still selling futures and buying puts in Copper. Per the past history of this market, I believe we could easily see a 40 to 50 cent drop over the next 2 to 3 months. If you want some examples of what can take place in copper, see our histories of Copper Tops at http://www.crokerrhyne.com/newsletters/04-12-05.htm . I certainly don't know if I will finally be right right in this market, but I still think this is an excellent bet to make.
Give me a call....There is a lot going on in a number of markets....