Two Ways To Play: Crude Awakening
Strengthen your portfolio in good times and bad.
According to Bloomberg, crude oil's record surge to $135 may be due to a short-squeeze: traders covering wrong-way bets that prices would decline. While prices jumped 2.6% in a week, open interest in contracts, the number of outstanding positions, fell 8.1%. Analysts believe this signals that money is moving out of the oil markets and traders are simply buying up contracts to close their short positions. Crude oil has closed at record highs on 27 days so far, prompting oil experts to say that the move has been due to traders and speculators rather than a shortage of supply. See Todd's Oil Of Oy Vey.
From the Bull Pen: Those still bullish on oil can use the oil ETF (USO). A pull-back towards the $100 level might seem a more plausible entry.
From the Bear Cave: Bears believe the move in oil is unjustified and may look to the Ultrashort Oil & Gas ETF (DUG) which corresponds to twice the inverse of DJ Oil & Gas index. Sell-stops can be set below $26.
UBS Raises More Capital
According to the Wall Street Journal, Swiss Bank UBS (UBS) will raise $15.1 billion in new capital. The new shares will be deeply discounted by 31% to yesterday's closing price. The company has already received a capital infusion of about $13 billion this year after suffering approximately $38 billion in writedowns to date. UBS just completed a sale of $15 billion in subprime and Alt-A securities to BlackRock (BLK) as part of an effort to clean up its balance sheet. Yet, investors remain concerned as the company still holds a large amount of these troubled assets. See Bennet Sedacca's Debt, Dilution, Default, And Denial.
From the Bull Pen: Bulls looking for a financial play might see one in New York Community Bancorp (NYB). The stock is trading near its 52 week highs and ended up on painful day for the financials. Sell-stops can be set near the $19 level.
From the Bear Cave: Bears see this UBS story as a sign that the financial sector is still in terrible shape. Bears are using the Ultrashort financials (SKF) which corresponds to twice the inverse of the DJ Financials Index. Sell-stops can be set near $104.
For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.
Quick Check Around the World
Asian trading closed with the Hang Seng -1.64%, Nikkei +0.37%, Sensex -1.95%, Taiwan -0.08% and Shanghai -1.65%.
A quick check of Europe finds the CAC -0.54%, DAX -0.48%, FTSE +0.12%
As of 8:40 AM EST, S&P Futures are trading -0.20 points to 1392, and Nasdaq futures are down -3.25 points to 1961.
A Look At Commodities
Commodities are higher. Crude oil is up +1.37 to 134.55. Gold is lower -2.90 to 925.70. Silver is down -0.143 to 17.8555, and copper is higher +1.95 to 377.30.
The dollar index is up +0.033 to 71.966.
On the Radar
Initial Jobless Claims: 365 k vs. 371 k prior.
Continuing Claims: 3073 k vs. 3060 k prior.
10:00 House Price Index (m/m): 0.6% cons.
10:00 House Price Index (q/q): -1.4% cons.
Click here for the full trading radar.
Happy Thursday. Good luck!
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