I was called on to Yahoo Finance yesterday afternoon, right before doing my webinar.
If you got my ‘emergency’ newsletter on Friday, with it’s recommendation to go shopping while oil prices were down more than 15% on the day, you probably think you know what I was going to say to them.
But I have to admit, I didn’t quite say that exact same thing.
Now, let me be clear – I believe that this drop in oil prices was/is an overwrought reaction to ‘just another’ Covid-19 variant that somehow gets forgotten soon after it is discovered. It happened with Alpha and with Delta.
Let me also be very clear – I’m no virologist, I’m an oil trader.
So, the reason I was a bit coy with Adam Shapiro on YF was not because I was trying to play doctor, it was purely because of the market action that accompanied this big ‘flash crash’ move.
$10 dollars is a LOT to lose in a day – even during the ongoing angst of a constantly morphing virus.
And even more telling, the rally back on Monday was not impressive, even after a weekend of ‘cooler heads’, yielding only a dollar and change to the upside. For an oil trader, that says a lot about how cautiously the markets were treating Omicron.
More observations of an oil trader, and not an epidemiologist:
1 – Markets go up slow but go down fast. I don’t know why, but that’s how it is. Downdrafts are therefore really scary.
2- Because of dynamic number one, markets also tend to ‘digest’ moves down more slowly, even when they are purely technical and not fundamentally driven.
3 – Fundamentally driven markets draw tremendous strength from technically driven ‘quick crashes’ – witness the negative bottom in oil in April 2020. They chase out weak players and can drive the markets more easily to higher highs on the next move up.
4 – The Biden coordinated SPR release last week was fundamentally inconsequential, but had already annoyed OPEC enough that it was talking about suspending its 400k barrel/day increase for the next month or two at the next meeting.
5 – The drop of oil prices below $70 a barrel now gives even better coverage for OPEC to suspend production increases into the market next week when they meet.
All of this makes for a backdrop of tremendous value in this oil market – that is, provided Omicron isn’t the variant that alpha and delta were, and is instead capable of shutting down countries and economies again.
As for me, I’m taking comfort from the most recent statements from Pfizer and Moderna, that were very careful in addressing this variant, but also confirmed the likelihood that their vaccines would competently protect from this latest type, and also confirm their ability to respond within weeks if their current vaccines couldn’t cope with it – with a new, tweaked vaccine.
Bottom line, I’ve been buying stocks.
But remember – I’m an oil trader, not a doctor.
For some ideas on WHAT to buy, if that’s your feeling as well, see below. If you can’t see what’s below, it’s because you’re not a premium subscriber. Why not sign up now? It’s only $25 a month!
