Friday, May 23, 2008

Maybe We Can Burn The Euro! -IFCN Wk 24 -Fri- Equity: $697.89

The dollar fell against 13 of the 16 most active currencies this week while oil hit a record $135.09 a barrel Thursday on the New York Mercantile Exchange. The U.S. still imports more oil than any other country.

Oil prices closed for the holiday weekend $3.00 a barrel below yesterday's highs.

Is oil going to keep streaming higher?

Maybe, but it is wise to remember this trading fact. The best bull markets are demand based rallies. Demand has been dropping in Europe and the US for a couple of years and China's demand is drastically slowing.

If they held a lottery and you were the winner of a supertanker load of gasoline, with the proviso that you had to get the 50,000,000 gallons off the ship and into storage somewhere within a month or lose the fuel-- you would lose the fuel. There is nowhere for you to put it because all storage facilities are full. Ask around.

Are there any lines at the fuel pumps where you live?

This oil move has all the earmarks of a classic “squeeze”. We have gone up $50 a barrel since the middle of January in a commodity which is in the lowest demand in years, and is easily obtained. 7 years ago they could all but give it away.

I know a woman in Texas who right after 9/11 was handed 60 (worthless at the time) micro-production wells instead of a final paycheck from a bankrupt firm, who now makes $3 million a year from the 1 – 2 barrel-a-day wells.

Yeah, there's no oil out there.

If you would like to hedge future production for many years to come at very high prices, I couldn't think of a better way to do it that what I see in the oil market today.

Why the discussion about oil? The greatest outlay in the world for any material goods is for energy, a market currently dominated by oil. Have no oil, it is tough to operate most countries. Although Japan's got something good going with their nuclear initiative.

An interesting sidelight to this energy situation is, the correlation between the up and down movements of oil prices and the eur/usd on a daily basis has been at 95% for the last 12 months.

It was still in harmony this week, with the eur/usd closing near the high of the week before the long weekend. Many blamed reports for creating uncertainty in the markets for the rocky action this week, but it is simply the weakest hands exhibiting fear. The coming weeks could very well be a make or break period in the oil markets, and by extension, the Eur/Usd.
Here's this week's recap--

The data below is as of Friday's close, May 23, 2008:

No OneNightStand trades were executed today.

Start of week equity: $734.36

OneNightStand Exit(s) on 05/19/08:

Completed FirstStrike trades this week:
  • Eur/Usd: long @ 1.5614, stopped out at 1.5554 for a 60 pip loss.
  • Gbp/Jpy: short @ 203.24, stopped out at 204.14 for a 90 pip loss.
  • Gbp/Usd: long @ 1.9612, stopped out at 1.9552 for a 60 pip loss.
  • Usd/Chf: short @ 1.0432, stopped out at 1.0492 for a 60 pip loss.
  • Usd/Jpy: short @ 103.78, stopped out at 104.38 for a 60 pip loss.
Total losses: 330 pips
Total profits: 0 pips
Net loss: 330 pips

OneNightStand 05/23/08 entry(s):

Unrealized Losses: -0-
End of week equity: $ 697.89 (includes unrealized P&L)
Total Loss for Week: $ 36.47 (4.9% weekly decrease)

The quick losses at the beginning of the week made it seem very short. I don't mind that. More excitement for the future.

In America we have a long holiday weekend, Memorial Day. The holiday commemorates all of the U.S. men and women who have died in military service to their country, many of whom did it to assist countless strangers in Europe in WW II.

Thank goodness they did, so that most of Europe can freely blame the US for all their problems.

I will be back Tuesday, but will send out FirstStrike orders early Monday morning. Europe will be trading and so will I.

Joel Rensink

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