Hold On Tight For The Rollercoaster Ride Of The Markets

The wildest and craziest market is the one we have on our hands. Friday’s action saw lots of panic but it also saw large cap oil related stocks actually fall as crude oil pushed about $138. Large capitalization oil stocks like Chevron (CVX) and Exxon Mobil (XOM) closed down on the day on heavier turnover. Even Hess (HES) was unable to break into new high territory, it too closed on its lows. Normally, these names help the S&P 500 and Dow Jones when oil moves higher, Friday was not the case. It was the small capitalization oil related names that did well. The NYSE indexes look real unhealthy at this point in time, the only healthy looking indexes are: NASDAQ, NASDAQ 100, S&P 400, S&P 600, and Russel 2000. This market is proving that the environment is for small cap oil related names.

Most professionals are not doing as well as many may think. I know many that are struggling to produce solid gains. It is difficult because the market is not reacting as we have seen in the past. Many charts like PWRD for example should have worked, but since we are in an ultra-sensitive world these things do not work. Markets have cycles where conventional wisdom is tested. Human emotion can swing to outside the normal range and when this happens you get markets that are “confusing.” Its at these times where staying disciplined is the most important tool you have.

Crude oil is undoubtedly the Headline grabber these days for the market. Where does it go from here? Most likely, given Friday’s action we will see a superspike in crude. Look for continued pursuit of “limit up” days in the market as Crude races towards $150 on onward. At some point crude will exhaust itself and drop like a rock back into a more normal trading range. Usually, commodities who experience these types of moves correct some 60-75%. In the short term, these small cap oil and gas related names continue to be on fire and are the place to be!

Posted in Categories: Commodities, Contributor, External Research, Stocks, USA.

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Comment by Bookey

2008-06-08 11:12:45

I agree with you that it’s a crazy ride, it’s been so long since the dow fell by so much in a day :( However, there will still be some people hawking “good bargain buys” even in this bloody mess!!!

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