The market performance this week was not exactly what was expected. Primarily I am talking about the crude futures. After gapping down on Tuesday and forcing stops on several of our energy plays the crude futures took off like a well fire. Crude sure likes support in the $57.50 range and every touch has brought a rebound.
The rebound this week spiked crude back to close at $61 for year-end and I can't help but think this was some kind of tape painting scenario for crude. We had several comments from OPEC about a possible production cut at the end of January but nothing we did not already know from prior sound bites. We also had a drop in gasoline and heating oil supplies on Thursday but the spike was already in progress before the news broke. There was bigger news in the gas storage levels with another -162bcf draw but gas futures barely blinked before falling under $11 and a new four-month low. Something was definitely strange in the crude pits and nobody seems to know why.
The bad news was stops being hit on BTU, PBR and UPL. Petrobras rebounded from the dip to $68 and nearly hit our prior sell target at $72. But, that is the breaks. I discussed last week that I expected energy prices to fall as unseasonably warm weather appeared for the holidays. I had raised the stops in anticipation of an exit so I can't complain.
I am glad I removed the $30 profit target from Overstock as it appears to be in free fall now after their profit warning and several downgrades. That will help soothe the pain of the energy stops.
We also got the best possible entry on the transportation puts with the DJ Transports and EXPD both spiking on Tuesday's open. No complaints there and I am looking forward to a long drop.
We were also triggered on the DJX put play on the watch list and the Dow closed at a six week low on Friday. When/if funds begin dumping stock on Monday we are poised to reap the benefits there.
I am not adding any new plays this weekend. We are positioned to capitalize on any market weakness and all our long plays are protected from any serious drops. I want to see how next week plays out and then make some entries from there. If you are looking for something new I would consider shorts on GM or BMHC. There is also plenty of room on the EXPD put around $67.
Happy New Year
Natural Gas Chart - Daily
Crude Oil futures Chart - Daily