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Price of Crude Set to Plunge

By Rick Ackerman Posted on June 25, 2012, 4:27 am EDT Last Updated June 25, 2012, 4:27 am EDT

Crude oil prices appear primed for a nearly 30% collapse, implying that the global economic slowdown is starting to take hold.  Our minimum downside projection for August Crude, currently trading for around $80 a barrel, is $55.69.  That target was derived using our proprietary method of technical analysis and would imply a decline of 27% from current levels. Please note that this is our minimum bear-market price objective and that crude’s ultimate bottom could be significantly lower. How much lower?  If the “Hidden Pivot support” at $55.70 were to give way easily, we’d infer that quotes as low as $35-$40 a barrel impend.

That might be viewed as great news by the mainstream media, since it suggests that gasoline prices are headed below $2 a gallon. But that’s like saying a nuclear detonation in midtown Manhattan would be great news for apartment dwellers because it would solve everyone’s cockroach problem. CNBC’s “experts” seem to think that a mere softening of crude prices would act as a kind of tax-cut stimulus for the U.S. economy. But softening is not what we foresee — more like a deflationary bust in a key global commodity to which huge swaths of financial assets are tied. And although we’ll concede that more travelers will hit the roads this summer if gasoline prices fall below $3, the gain in tourism dollars  would not be much of an offset to the global economic collapse that appears to be gathering force.

Summer of ’87?

At this  point, it looks like a perfect storm. Europe’s economy is about to go into a recessionary free-fall, China’s slowdown is looking increasingly like a hard landing, and the U.S. is at cliff’s edge on jobs, income growth and consumer confidence. Statistically speaking, all are fading so fast that it seems clear the Great Recession’s dead-cat bounce  is just about over.  In the  meantime, we should expect Wall Street and its news-media lackeys to keep stocks buoyant for as long as possible so that the  rubes – including widows, pensioners and Baby Boomers desperate for yield — can be enlisted as bag-holders before the boom drops. We have our doubts that DaBoyz will be able to keep this shell-game going till August, as they did in 1987. In fact, it’s possible that early May’s highs in the broad averages will come to be seen as a top equivalent to the one 25 years ago that preceded the October Crash.

For our part, we’ve enlisted graduates of the Hidden Pivot Course to help identify short-able, corrective rallies in such popular trading vehicles as the Diamonds (DIA), the QQQs and the E-Mini S&Ps. Want to join us?  A free trial subscription, including access to a chat room that doesn’t sleep, is yours by clicking here.  And if  you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • Alyssa July 17, 2012, 1:01 am

    Oil seems to be going back up. Do you still predict a crash?

    &&&&

    Yes. RA

  • Robert June 28, 2012, 12:19 am

    Ok, more perspective on this crude oil plunge of late:

    hedges.

    All the airlines and gasoline companies had put on record fuel price hedges during the first half of 2012….

    These trades are now getting absolutely pummelled.

    Who is the counter-party of any hedging contract in the futures market? ummmm… big banks.

    Who always wins the game of “shuffle the wealth from you to me”…? ummmm… big banks.

    Don’t try to read more about reality from the crude oil charts than is really there.

    the CCI has trended downward toward it’s long term support at 500, and bounced. If the bounce fails and it turns lower and breaks support, then the next major support for it is at 450, and I’ll be buying ZSL and selling AGQ $25 puts like a corn-eating mo-fo.

  • Bradley June 26, 2012, 3:58 pm

    I love it. The Day After, (with caps no less).
    As good as you probably were at the newspaper biz Rick, you really missed your calling in Hollywood. I can hear the trailer for The Day After now, read by a guy with an abnormally low voice, breathy, punchy and SCARY!

  • JT June 26, 2012, 3:48 am

    Sorry, why does the chart of Nymex Crude above say that oil peaked at 200 in ’08? I believe the high was around 146 at that time.

  • Bradley June 26, 2012, 2:41 am

    The idea of an instant shift to barter has me wondering just how that could possibly work.

    How would the grocery store, for instance, buy the larger volume of goods they require to sell us things for $1 and $5?
    How would suppliers of fuel sell their tankers full of the stuff to local gas stations? Would they receive a wheelbarrow of $10’s and $20’s?

    Under such a scenario, how would any international commerce, stock purchases, derivative trades, investment banking, regular banking!, car purchases, house or property sales, literally any complex or expensive transaction occur?

    Would we all be back to melting lead to fabricate bullets to defend ourselves and murder others to obtain food?

    Who in his right mind would plant large acreage of foodcrops knowing that they would likely be murdered for the food.

    250 million hunter gatherers, (just in the US). “Ever eat a pine cone? Some parts are edible…”

    • Mark Uzick June 26, 2012, 5:25 am

      Rick seems to saying that checking account balances would just disappear, leaving people with no money to transact exchanges. If I understand correctly, then I find that hard to believe. I think that defunct banks would be seized and any lost depositor’s money would be replaced with fresh ones and zeros; and if the fearful wanted their cash, and if the bank ran out, they’d simply get a cashiers check to deposit in another, possibly seized, bank; and, for a while, there would be a shortage of printed money due to mattress stuffers, but checks and plastic would still work.

      If Rick means that if fear and confusion led to a freeze up of banking operations, then it will be announced that all checks and debit card transactions with available funds will eventually clear as soon as illiquid banks are seized and made liquid again so that business can continue to be transacted with trusted regular customers; and restrictions on third party checks would have to be relaxed to ease the process. Priority would have to be given to demand deposit accounts – savings and time deposits following later.

      It would be prudent to have physical cash for day to day expenses, but the large expenses might require landlords, mortgage holders and bulk sellers to accept and hold checks for a short duration or, for instance, a landlord may have to pay his mortgage with double endorsed tenant’s checks.

      The real fun will start when FRN’s hyper-inflate to nothing – people’s life savings in banks, annuities and bonds are wiped out; and because of legal tender laws, no alternative medium of exchange is available to transact business so that prices will have to be adjusted on a daily basis.

      &&&&&&

      The entire clearing system as it currently exists is based on egregiously misplaced trust. What makes you think anything will clear The Day After? RA

    • mario cavolo June 26, 2012, 7:38 am

      ….guessing games…because the “President” will order the banks to clear to prevent massive civil unrest and violence…so then simply once again the govt will “guarantee” the cash will be there one twisted way or another…with the final result much the same in that, yea, you’ll get your money, but then its purchasing power will be lower lower lower to whatever degree…

  • Mark Uzick June 26, 2012, 12:02 am

    Rick: “When Sinclair spoke at the CMRE dinner in New York City last month, I asked him what would happen if a flash crash caused the global financial system to collapse literally overnight, leaving the central banks no time to counter a financial-asset implosion with QE. The very term “quantitative easing” does imply a PROCESS, after all, but the banking system flash crash we should all be expecting by now would not permit it. Instead, we could go straight to barter — an outcome that would hardly be inflationary.”

    Yes, for a moment FRN’s may become king, but then, in a barter economy, wouldn’t gold and silver become king too, but only more-so as expectations of money printing to fund bail-outs and transfer payments to the desperate, suddenly jobless and the replacement of lost tax revenues motivate the more liquid of those with things to sell to prefer gold and silver to cash?

    I think the barter would be mostly for things like food, gas and heating oil. I doubt that landlords would evict tenants, mortgage holders would foreclose, cars would be repossessed and utilities shut off just because people’s checks and ACH payments were temporarily suspended until the banks were either bailed out or nationalized and bolstered with plenty of fresh fiat.

    How long could it possibly take before the fiat is flowing from the state to every desperate person or institution? In an economy that was deeply depressed, with crippled production and the money spigots turned on full blast, prices would hyper-inflate.

    • Rick Ackerman June 26, 2012, 1:29 am

      The crux of the hyperinflation argument is that The Government would not let itself be outbid for necessities — that it would create as much money as needed to buy what it already buys, meeting whatever price is demanded with a sea of fresh snide. We had all better be holding physical bullion when that day arrives, as you have implied. In the meantime, though, I’d suggest keeping that shoebox of $5s, $10s and $20s handy, since the flash-crash scenario would hit like a deflationary thunderclap, knocking nine zeros off the global balance sheet overnight and limiting the economy to purchases made with cash-on-hand or barter.

    • SD1 June 26, 2012, 6:11 am

      You should beware of anyone who calls fellow gold bugs “extended family” or “Comrades in golden arms.” Talk about a pile of nonsense, and Jim Sinclair is selling it.

    • mario cavolo June 26, 2012, 7:24 am

      Gents, the word of the day is “snide” … as in Rick’s “a sea of fresh snide” 🙂

      I always considered as snide’s definition as referring to a person making a snide remark….:)

  • Chris T. June 25, 2012, 9:59 pm

    Oil at $55, if gas follows, would not be good for Willard, silver lining?

    As to the “depression”:
    Depressions are when the elite suffers, and the average Joe actually does better, due to declining price levels (even with higher unemployment the large pop. still has jobs).

    Whereas the “good times” are when the standard of living of the average joe goes down, ie, every since about 1971.

    And if the fiat dollar, as is pointed out above, does get better for some years as the last man standing, then it will only make it worse for us at some point, because the ease of debt financing now will lead to its even more increased use than already.

    • Robert June 26, 2012, 6:53 pm

      “Depressions are when the elite suffers, and the average Joe actually does better, due to declining price levels (even with higher unemployment the large pop. still has jobs).”

      Thank God at least one other person understands reality for what it is…

      Howie Katz speaks from beyond the grave?

      Here’s my oft-repeated counter-point to Rick (and today to Vlad as well) regarding their “debt deflation will be economic hell” viewpoints:

      Go outside, sit down under a tree, and consider what it would mean to default on your debt obligations.

      Would the Bank REALLY send a hit-man to put a bullet in your brain? Really?

      Now, consider that you stop making your mortgage payments, and yet you continue living in your house until the jackboots come to forcibly remove you….

      Would you really be homeless? Would you really be out of money? Have you seen the volume of cheap rentals out there? the volume of houses available for immediate move-in is at multi-decade highs

      if deflation means cheaper gas, and cheaper food, but higher real debt burdens, then people will simply stop paying on debt, and will continue to enjoy the cash-benefits of cheaper gas, and cheaper food.

      Rick Ackerman repeats it often: all debts must be paid; either by the borrower, or by the lender.

      The ONLY thing real deflation indicates is that borrowers are sticking the pay-back burden of existing debt to the lenders en masse.

      Deflation will mean more scrambling by lenders to re-negotiate the terms of existing notes in order to keep the underlying loan performing. And how will they entice borrowers to continue paying? Why, by offering cheaper interest rates and principle/collateral valuation writedowns, of course…

      The commercial banks have only ONE goal, and it is not to increase or decrease the dollar value of their loan portfolios. They honestly couldn’t care less about that.

      The commercial banks’ only real goal is to keep the POPULATION of borrowers in their loan portfolios constant or growing. That is what the bankers work for. Keeping a growing population of borrowers means the banks have cause for continually increasing employment of new bankers and administrators…

      At some future date, if macro economic conditions warrant it, the banks will be gladly writing re-fi agreements against a 50k principle, for 0.15% APR against lower Manhatten penthouses, if it means that people will continue to borrow and make payments, rather than save and make purchases.

      Deflation… again I ask- who the hell cares?

      For the average Joe, real deflation is a far more Utopian ideal than anything Keynes could have cooked up.

      People will still need plumbers, and electricians. Who gives a rip if the world suddenly decides it doesn’t need investment bankers, or financial analysts, or exchange floor traders….?

    • Chris T. June 28, 2012, 6:23 pm

      Robert,

      indeed, I used to post links, etc. to Howard Katz’ comments, and it’s not my original thought for sure.

      Was sad to find out that he passed away so early, his commentary nowadays would be very interesting indeed.

  • Rich June 25, 2012, 8:46 pm

    http://www.thedailybell.com/4023/Forty-Million-Houses-in-the-US-That-No-One-Needs

    • mario cavolo June 26, 2012, 7:12 am

      Sweet Heavens to me for THAT statisitic Rich!

      What I have been trying to tell the nitwits on the supposed ghost town phenomenon in China? Let’s compare: 40 million dead houses in the US with a population of a measly 150 million that do have stable financial situations, a flat economy with a weak housing sector, yea gee, THAT IS a relative problem.

      Now compare that state of real estate affairs to China, there is a swelling, rising middle class of 300 million flush with cash, expected by GS and the UN to quadruple in size in ten years (even I find that hard to imagine) , urban migration bringing millions more per year into the cities. Good grief even if there also 40 million empty apartments here, it is obviously of far less concern and impact on the economy and real estate sector.

      Cheers, Mario

  • Rich June 25, 2012, 7:34 pm

    Nice calls Vlad.

    May well be right on gold at some point yet to be determined.

    Order in to buy AGQ Jul 37 calls at low of the day.

    SLV targeting 57 on apparent flight from Soros FX that may dwarf breaking the Bank of England Pound in 1992:

    http://en.wikipedia.org/wiki/George_Soros

    Cheers…

  • C.C. June 25, 2012, 6:49 pm

    Amazing – our short memories… And if you care to test that supposition, simply go back to the archives of your favorite hard-core bloggers from 2008 forward. Do you not see similar comments/sentiments – or more eerily, the Exact Same prognostications made about the immediate future – from then, until now? Europe is set to crash. China is set to crash. Oil is set to crash. The $USD is King. Central banks cannot overcome deflationary pressures, there is no more wiggle room left, Bernanke is out of bullets, etc.

    We’ll see.

    @Robert’s sarcastic post above addresses this rather nicely. In other words, here we go again.

    • Rich June 25, 2012, 7:39 pm

      No doubt Helicopter Ben again may try expanding the Monetary Base from some lower perch.

      But with what result?

      QE rallies demonstrated diminishing economic and market returns:

      http://research.stlouisfed.org/fred2/series/MZMV?cid=32242

    • Rich June 25, 2012, 7:54 pm

      Since 1929 and 1979 our economy demonstrated there is no substitute for free markets and hard work with property rights, responsibility and Constitutional money (Gold, silver (copper)).

      Fiat wars do not create prosperity except for bankers and da kine.

      Aloha…

  • redwilldanaher June 25, 2012, 6:06 pm

    But wait! If we all agree to put our blinders back on, the artificial earnings look great and the foundations become irrelevant!

    As we all knew, centralization has failed yet again on the surface but it’s not for us to know as to how this advances the PTB end game…

    On a lighter note, seems like the Fast $ Fools are shocked now that their blinders have been forcibly removed by price action…

    The main reason to be long the market according to CNBC bulls is…., you guessed it, look at the price of the overpriced designer hardware juggernaut…

    • Rich June 25, 2012, 7:36 pm

      As in GE Credit Bank targeting 23.5…?

  • Rich June 25, 2012, 5:39 pm

    —– Original Message —–
    From: Arch Crawford
    To: Crawford Perspectives
    Sent: Friday, June 22, 2012 12:20 PM
    Subject: CONSULTING CLIENTS 120622

    CRAWFORD PERSPECTIVES
    CONSULTING CLIENTS
    JUNE 22, 2012

    This should be quite a Tense but interesting weekend – AGAIN – ONLY MORESO!

    There is an extremely rare DOUBLE GRAND CROSS in the sky on Sunday.

    Twice in the last 20 years we have seen these powerful sky patterns where natural disasters ocurred but little or no effect on major markets – it CAN happen. Even then, when later transits activated these points, there were more natural diasters and some of these DID effect market action immediately, although these transits were weeks or even months after the original event.

    We expect this one to tear a hole in something this weekend because of the tenuousness/fragility of world financial systems uppermost during this time frame.

    Whatever happens now, much worse is coming down the pike during the Mars-Uranus CRASH Cycle from July 18 to late February.

    We wrote in the June 11 CP newsletter:

    JUN 24 = Now we get into the Really BAD, BAD, BAD stuff as we experience the first of seven Uranus/Pluto squares.
    JUN 25 = Monday morning Very active as dour Saturn turns direct in motion and Jupiter squares Neptune=Mixed Inflation/Deflation news

    We are remaining LONG QQQ PUTS and LONG NEM CALLS! (We have current positions and will complete by close today).

    • Rick Ackerman June 25, 2012, 11:30 pm

      I think Arch has spotted Kahoutek making a second pass. Has anyone ever gotten it right with one of these breathless forecasts?

    • Mark Uzick June 26, 2012, 1:08 am

      From what I’ve heard, Arch Crawford has one of the best track records. He’s both a technician and an astrologer. If the astrology is nonsense, it doesn’t matter, but I’m sure it serves him well to bring him clients from that market niche.

      Like theology, astrology is interpreted by its believers in a way that always justifies their convictions, so if he’s a good technician, then you can have respect for his astrology as the form that his intuition applied to his technical skills give shape to.

  • Robert June 25, 2012, 5:37 pm

    “Europe’s economy is about to go into a recessionary free-fall, China’s slowdown is looking increasingly like a hard landing, and the U.S. is at cliff’s edge on jobs, income growth and consumer confidence. Statistically speaking, all are fading so fast that it seems clear the Great Recession’s dead-cat bounce is just about over. …”

    Yes, and I’m sure this will inspire government’s to stop borrowing against future generations, and I am likewise sure that central banks will continue refusing to lend to governments at near 0%

    Just yesterday, I refreshed my memory by re-reading Ben Bernanke’s famous 2002 presentation “Deflation: making sure it happens here” , where he boldly declares that deflation is great for economies, and that the best tool a Central Banker has when deflation hits is to fire up a their helicopter, and use it to go on vacation… you know, since fuel is so cheap. 🙂

    The King dollar intermediate trend has nothing to do with the dollar – it has everything to do with the world’s central bankers doing all they can to endure that at least ONE fiat currency maintains some semblance of strength.

    Any trader worth the value of their analysis knows to sell strength.

    The oil trade is simply the futures market responding to the physical supply glut that has been building since oil crashed in 2008. One only need look at the natural gas charts to infer the directional bias…

    However, when the charts tell the exact same story to everyone looking at them, My instinct is to steer clear of the herd.

    Today, I sit on my hands, and just watch the world go by….

    • Rich June 25, 2012, 8:45 pm

      “Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. “Stand and Deliver or Go Home” should be the rallying cry of the gold longs to the paper gold shorts.” –Trader Dan Norcini

      My Dear Extended Family,

      Never before in the entire period of 1968 to 1980, or 2001 to present, have I received so many copies of classical deflationist scenarios in one day. It would seem as if the God of Deflation overflew the gold guys and dropped their leaflets.

      Classical deflation does not have a snowball’s chance in hell of occurring now for any length of time. To assume that you have to hold the belief that Bernanke is a mole in the present administration, placed their covertly to bury the present administration so deep that there will never be a democrat in office after 2013 anywhere.

      If you believe there is a political appetite for the collapse of the Western financial system, they had a perfect chance in 2008 and did not accept that great opportunity to purge the system of Banksters for political reasons.

      The problems of 2008 are here now and greater. Derivatives still challenge the entire system at a greater level. A major under the covers audit is being done right now of some major banks for serious OTC derivative problems. Market miscreant activity allowed the break to near nothing for many financial institutions. The activity specifically is the absence of the uptick rule, which is still missing. The regulators are controlled by Washington which in turn is owned by the hedge fund and bankster’s lobby.

      Nothing whatsoever has changed except the degree of difficulty which has risen to a level never existing in market history.

      The rescue will come in the form of QE to infinity for the entire western world’s financial system.

      The market historians making fun of the gold community may not like the fact that it was the huge communication to his prison authorities and the system that actually got him the opportunity for freedom. Whatever the mental level reason for his hate of “Gold Bugs,” he is wrong.

      Gold is going to and through $2111 on its way towards Alf’s levels.

      The euro and the dollar, in that order, will be bailed out. QE will rise to infinity the longer Bernanke plays chicken with the present administration for perseverance of the private bank, the Fed, and its power.

      Please stop sending me copies of the latest tome from our respected market historian. The history he is going to make now is his largest market error in his career, scaring the life out of investment protection insurance non trading gold holders, so much so that when they leave they will never return to the gold market.

      I have written about Currency Induced Cost Push Inflation hundreds of times. They are all in the compendium. Our beloved historian does not understand this concept, but will be defrocked by it.

      This popular writer is determined to walk the halls of ivy again, doing anything necessary to make that happen. Part of that is not having a history of being rescued by the “Gold Bugs,” which he was. I knew him in the 70s when he looked down at me as not in his high circles.

      Nothing has changed.

      Respectfully,
      Jim (Sinclair)

      &&&&&

      When Sinclair spoke at the CMRE dinner in New York City last month, I asked him what would happen if a flash crash caused the global financial system to collapse literally overnight, leaving the central banks no time to counter a financial-asset implosion with QE. The very term “quantitative easing” does imply a PROCESS, after all, but the banking system flash crash we should all be expecting by now would not permit it. Instead, we could go straight to barter — an outcome that would hardly be inflationary.

      Sinclair ducked my question, and another from Jay Taylor with a deflationist theme, reiterating the well-worn schpiel above. His certitude is what troubles me, since no one can be sure how the coming collapse will play out. If it is flash-crash sudden, though — and that cannot be ruled out — I feel pretty certain that $5s, $10s and $20s will be the coin of the realm for a while as the banks struggle to reopen. Gold and silver will find favor over time, but don’t expect the grocery store or filling station to know on The Day After how to handle your Krugerrands and pre-1964 Roosevelt dimes. RA

  • fallingman June 25, 2012, 5:08 pm

    Wow. Bold call. And well written too.

    Compelling.

    Thanks.

  • fallingman June 25, 2012, 5:07 pm

    Thanks for the link.

    It is as advertised….concise and pretty darned comprehensive for 5 mins.

  • Rich June 25, 2012, 4:21 pm

    Rich Cash ‏@richcash8
    Reloaded third market tranche > +23% weekend puts in markets < half hour. Order in to buy another 1/3 SPY 122 calls at low of day…
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    7:20 AM – 25 Jun 12 via web · Details

  • John Jay June 25, 2012, 3:09 pm

    Rich,
    It takes an old timer to appreciate the results of decades of accumulated inflation. I am of course happy to see some price relief at the pump. But I have to laugh at the chorus of hosannas from the MSM over the recent pullback in gas prices. Gasoline demand in the US has been declining for years. There will be a reaction on the supply side, and refineries will be shut down, just like the number of NG drill rigs is declining is response to that price collapse. It all comes down to micro, gaming the market to make money, vs macro, the systemic effects of the financial chaos around the globe.
    Congress is already planning on killing the huge budget cuts and tax increases that are upcoming. The MIC is screaming that a 500 billion dollar cut is “dangerous”, and the lobbyists are pulling the strings of their puppets.
    I predict that the Republicans will to agree to forget about half of the mandated cuts if the Democrats agree to forget about the other half. My old home state of Connecticut is running out of cash again. And CT is far from a poor state. Now, Obama seems to believe the problem is that too many State and Municipal jobs have been cut. You can’t fix stupid and corrupt.

    • Rich June 25, 2012, 3:56 pm

      Amen JJ from the Halle Berry Leonard Cohen Hallelujah Chorus and a guy who collected Silbver Dollars when they were a buck each and could be exchanged for a paper dollar at a bank….

  • martin schnell June 25, 2012, 2:15 pm

    Doesn’t a lot of Iranian crude come off the market July 1 due to sanctions? Should provide a bit of downside protection.

    I don’t doubt that we could see a short sharp spike down in prices but Saudi can not afford to have prices too low for too long (they have too many unemployed that they have to pay off each month to avoid unrest), so that short spike, if it comes, will be a nice trading op.

    &&&&&&

    I haven’t really thought about any scenarios, Martin. Because they are probably going to be wrong anyway, that’s the nice thing about technical analysis. I have come to trust what the charts are telling me, and they are telling me that crude is set to fall to at least $55. As for the odds of my being correct about this, that’s a question you can ask in the chat room. RA

  • Mark Uzick June 25, 2012, 10:31 am

    I’ve had 3 profitable USO put trades since oil turned bearish. I’m on my 4th (still open) trade and Rick’s words sound very encouraging for me.

    • Rich June 25, 2012, 4:05 pm

      Nice trades MU…

  • Rich June 25, 2012, 8:05 am

    Aloha All

    Would anyone on RP believe Black Monday with $52 crude on multiple headline feel-good fakes?:

    Twitter Rich Cash ‏@richcash8:

    Re picking DIA, QQQ and SPY tops,

    A) sold SPY Jul 133 calls @ 2.73,
    B) bought QQQ Jul 54 puts @ 1.52 and
    c) bought SPY Jul 134 puts @ $2.53

    late in the day Friday,

    before the closing and post-closing swoon. Like it when the market runs and capitulates.

    If positions go a little lower, will add/dollar cost average a few more to the slingshot effect.

    If they go down 20%, Sayonara.

    Mental Trailing Stop Buys and Sells work better than actual orders often whipsawed.

    If positions continue to be profitable, will hold them at least 24 hours.

    As Rick often preaches and teaches here, options are a time-wasting asset.

    The trend is also our friend.

    In the past held options too short with fear and too long with greed.

    What I like about options is limited risk with much higher reward. Racking up 15% a day instead of going for a home run and striking out can add up quickly.

    A Constructive Note:

    Used to use multiplicity of technical timing indicators, including 1-minute charts, 13/34, Big4, EMA, ABCD, MACD, Point & Figure, RSI, Stochastics, Volatility, Volume Punctuation at turning points, Selling Green and Buying Red mini climaxes.

    Now find buying ST price and volatility low of the day when asks exceed bids and selling high price volatility of the day when bids exceed asks, can get a profitable piece of the trade as long as it is not an outside day.

    If it is, cutting the losses and staying with the profits works.

    Forget who said “Buy when the crowd is afraid,” and “Sell when the crowd is greedy,” but it seems to work.

    Right now the crowd seems greedy, even hopeful for EZ, 0, SCOTUS, Syria, after the weekend.

    (Ideas on RichCash8Trade Blog worked much better than challenging incumbents for election.)

    Mahalo nui…

    • mario cavolo June 25, 2012, 8:15 am

      Hi Rich, while in the end I make no claim to steady successful profits in options game, my best trades were when I saw a move coming, took short term in the money high delta calls or puts; often watched them move 30-50-100% within a day or two or three and get the hell out…a few nice GS and Kodak and EUO plays come to mind….Cheers, Mario

    • Rich June 25, 2012, 3:52 pm

      Nice trades Mario.

      Just took 23% profits with total elapsed time in open market less than half an hour.

      Twittered to document:

      Rich Cash ‏@richcash8
      We just let go of QQQ and SPY puts on overwhelming demand for them… May lock and reload on any retracement…
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      6:42 AM – 25 Jun 12 via web · Details

  • John Jay June 25, 2012, 5:22 am

    I would welcome deflation as much as the next plebeian.
    However it depends upon your time frame.
    I remember paying $.99 a gallon for premium gasoline about 10 years ago. Where I live, it spiked to almost $5 a gallon recently and has now fallen back to near $4 a gallon. So after a 500% increase in 10 years, it has fallen back 20%. What happens with Syria/Turkey/ Egypt/Iran/Russia/China might make that recent $1 a gallon drop just a higher low in an uptrend.
    I think $75 is good place to look for support for crude, but that is just my guess. Since I love conspiracy theories, I believe that the Saudis made a deal with Obama to keep supplies plentiful until the election in November. But there are limits to how far they will go with that promise. As Joseph Kennedy is rumored to have told JFK as he financed his run for POTUS, “I’m not paying for any landslides”.

    On the candy front, the 8 pack of 1.5 oz chocolate candy bars is now a six pack! Pretty hard to shrink a 1.5 oz. candy bar I imagine, make an 8 pack a 6 pack is the only option.

    • mario cavolo June 25, 2012, 7:03 am

      Hi JJ,

      While I fully understand Rick’s view, I am thinking, corectly or not, that a crude short position is better than an equities short position. I fully believe the sort of “conspiracy” you refer to regarding high level intentions to keep crude cheap as a way to keep people calm, especially going into the elections.

      Bottom line from my point of view, crude going down is viewed and will be pitched well as welcome relief on expenses while stocks going down is viewed as a negative…hence, I am in the short position via SCO and may we please enjoy the ride. Meanwhile, again, isn’t it welcome relief that oil and the other commodities would go down in price across the globe?

      Cheers, Mario

    • Rich June 25, 2012, 8:10 am

      JJ:
      Lived in near Motown in the 60s and recall gas wars with prices as low as 12 cents a gallon.
      Late parents enjoyed similar prices when they first vacationed in Mexico when it was safe.
      Today filled up at Carson Costco for $3.569, 12 cents cheaper than Arco, usually the lowest.
      Off alcohol, caffeine, dairy, fat, meat, nicotine and sugar, but haven’t yet kicked the petrol diet.
      Regards…

    • Mark Uzick June 25, 2012, 10:56 am

      If oil continues to drop, then look for some loud saber rattling from Iran, especially against its Persian Gulf neighbors. That’s why I doubt it will get too much lower than $70; the Iranians couldn’t afford to let that happen for long.

  • SD1 June 25, 2012, 4:44 am

    You might as well kiss gold goodbye while you’re at it.

    • Mark Uzick June 25, 2012, 10:45 am

      Why not just hedge gold with GLD puts and buy more gold and lower strike puts with the profits if it drops?

      &&&&&&

      Except when under close supervision and using Hidden Pivot timing tools, Mark, I try to discourage subscribers from buying options — especially puts, which go against the historical upward bias of markets. I have been at it for nearly 40 years and have met many thousands of option traders both on and off the trading floor. In all that time, I have never met a single one who profited consistently as a retail customer using options for directional plays. RA

    • Rich June 25, 2012, 7:24 pm

      Amen Rick re buying options…

    • Mark Uzick June 26, 2012, 12:28 am

      Rick, not even as a hedge to avoid the tax consequences of selling a position to protect your capital? Selling can create capital gains tax liability or capital losses that would be better used to offset gains in the following year. The tax savings might mean that the puts are essentially free.

      Most directional traders who trade the underlying equity are probably losers too. In either case, both successful and unsuccessful directional traders can use options to reduce the risk of getting wiped out by a black swan event, if they use reasonable money management.


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