Oil to $200?
Nomura Securities stirred things up recently by saying that oil prices would spike over $220 a barrel if unrest spread to Syria and Iran. Some investors are taking that bet.
Bloomberg reports that the open interest for June 200 call options for oil has gone from 1,500 to over 8,000. It might seem unlikely that oil will go over $200 in just 3 months. But if it does, these traders will make a lot of money.
It should be pointed out that these sorts of price targets for oil are based on the possibility of further instability in the Middle East, along with more supply disruptions.
There is reportedly a "day of rage" scheduled for March 10 in Saudi Arabia. Government officials have been reminding citizens that protests are illegal. And a few Shiite clerics have been arrested for demonstrating. If this "day of rage" brings protestors into the street, oil will probably rally.
Of course, oil prices briefly spike lower yesterday morning on a report that Qaddafi was seeking a compromise with Libyan rebels that would allow him to leave the country. This goes to show that there is a big fear premium in oil right now.
*****European stocks are getting whacked today after a ECB member said that rates could rise as much as three-quarters of a point this year. That would put pressure on the U.S. dollar, for sure.
*****TradeMaster Daily Stock Alerts trading strategist Jason Cimpl sent me this note this morning:
According to Fitch, China has a better than 60% chance of having a banking crisis by 2013. While that may seem unimportant (and it is) long term investors should use that data to make long term investment decisions. If Fitch was calling for a recession, it's not news, but a crisis. That's bold.
You may recall that yesterday I said that China's central government would eventually fall. And I said it might be inflation that does it. But a financial crisis might do the trick as well.
In case you missed it, Jason's video seminar "How to Trade with the Trend for Maximum Profits" aired on Friday.
In this 30 minute video, trading strategist Jason Cimpl shares some of his techniques for sticking with a rally to generate gains like 40% and 17% on CCME, 50% on ALJ and 55% on HILL.
There's an "on demand" replay available HERE if you'd like to get some trading/investing education from a top-notch analyst.
*****PIMCO's bond guru Bill Gross is warning that Treasury bonds will suffer a large decline when the Fed ends QE2 in June. Gross says that the Fed has bought around 70% of the Treasuries sold since QE2 started.
Yes, the Fed is financing the U.S. deficit.
I've long felt that the end of QE2 is an important catalyst for the stock market. And I think it's safe to say that it hasn't been priced in yet.
If unemployment continues to improve, the end of QE2 could actually be a bullish event. But the Fed would need to show some confidence that the U.S. economy is improving and that further stimulus is not needed. If the Fed simply stated that it ran out of money, that probably wouldn't be as good.
