Oil and Ford

Posted by dann
September 18, 2006 at 6:18 am

***Written By: Dann Mcnulty Stock Forum ID: WallStGolfer31***

I’m going to start out with a link to the just the chart, I think it says it all.

What happened? Hedge funds exiting all at once? A genuine decrease in demand effecting the price? The end of the bubble?!?!

For all we know it could be any of those above. Some oil bulls are predicting a rise back up to $75, but that’s probably becasue they were long since about $80, HA!

You want to know what I think it is? I think it’s the oil markets reaction to a tightening Fed. Yes it may be a little late, but it take a little time for information to get soaked up. The fed has been known to overtighen, why should it be any differnet this time? The oil market participants are just now seeing that a Fed who overtightens will effect the economy big time. Once the previous rate increases start to effect the overall economy to a material degree (there is a lag even though it gets priced into stocks fairly quickly) the consumer will start to slow down.

Once this occurs the consumer will start to spend less, less imports (Less money flowing to the BRIC countries), Less oil demanded for not only traveling, but manufacturing, less packages shipped, using less gasoline for those big UPS, DSL, and FedEx trucks. You get the idea. We see the consumer slowdown/recession getting priced into the treasuries (via an inverted curve), now we see it get priced into the oil market!

The real question though, is this the end of the oil bubble?

On another note, we saw Ford get BEAT UP the other day. A big reason for the drop isbecasue Ford eliminated the dividend. But does that Jusitfy the 12% drop it incurred? Not really, here’s why. Some mutual funds have a provision in thier fund “rules” that they can only own stocks that provide dividends. The other say Ford announced they were completely cutting out their dividend. They wern’t even making money, about time eh?

This new CEO means business. He has come in with a plan and isn’t waiting to start working on it. I’m not saying Ford is a buy, I’m not qualified to give that opinion, but this guy has alot more direction that Bill Ford did. If things are going to be profitable again, this man will be the CEO to do it.

GM on the other hand, is starting to head in the direction of the future already. No I’m not taling about those joke of a product called ethanol cars. Those will never work out the the midwest. I’m talking hydrogen cars baby! They have a model, not yet released to the public (I have no clue if it even is going to be), that uses hydrogen as fuel. I only saw a short speical on CNBC about it, but this is promising! Hydrogen cars are the future, and GM’s steps are a positive thing for them in this direction.

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Comment by Spike

2006-09-20 10:48:47

Interesting thoughts, Dann.

End of the bubble you ask…. perhaps it is. It’s clearly acting impulsively bearish isn’t it. Here’s a chart with a speculative count I did on Friday morning. Since then it’s done the little blue 4 up and is into the 5 down today, the CL V6 hitting 60.60 this morning. 59.00 should be good support and coincide with 5 completion for the abc correctives up to perhaps 63.00. At that point, potential is high for the bigger red 5th down to a trucated 5th to 59.00 support for the bounce and bullish recovery…..or new lows sub 59.00.
More charts and market commentary at http://technicaltrades.net best to ya!

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