• 16 hours Jeff Bezos Doubles Down On Space Colonization Ambitions
  • 22 hours Gold Mining Stocks Stuck In Limbo
  • 2 days Executive Order Targets Huawei Over Espionage
  • 2 days Why Now May Be The Best Time Ever To Hold Gold
  • 3 days Fake News Sinks Shares In UK-Based Bank
  • 3 days De Beers To Build $468 Million Diamond Recovery Ship
  • 3 days Moody's: Turkey Faces Possible Credit Downgrade
  • 3 days Tesla's Solar Sales Are Slipping
  • 4 days Auto Industry To Get Temporary Tariff Relief
  • 4 days Welcome To The World’s Biggest Free Trade Area
  • 4 days Central Banks Are Stockpiling Gold At The Fastest Rate In Half A Decade
  • 4 days U.S.-China Impasse Threatens Rare Earth Trade
  • 5 days Wall Street Bears $1 Trillion Brunt Of Trade War
  • 5 days Mobile Sports Betting Isn’t Quite Minting Millionaires Just Yet
  • 5 days The Marijuana Industry’s Shocking Secret
  • 5 days A Generational Shift Is Quietly Unfolding In The Mining Industry
  • 6 days Pentagon To Pay $6 Billion To Help Build Border Wall
  • 6 days Beijing Backlash: Stocks Slammed, Gold Boosted
  • 6 days Market Sentiment At Its Lowest In 10 Months
  • 6 days Trader Compares Current Market Environment To 2007
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Hedge Funds Remain Bullish Oil

Just as the case with Silver, so do the hedge funds remain stubbornly long in crude oil.

Here is the updated COT chart as of last Tuesday, December 29, 2015.

Crude Oil Ownership
Larger Image

What intrigues me the most about this chart is that the Commercial entities continue to add to their already sizeable net short position. Clearly they are not lifting short hedges in anticipation of a bottom in oil but instead seem to be bracing for a more protracted period of lower prices.

That is a distinct contrast to the hedge fund community which has ridden this entire move lower in crude and managed to lose huge sums of money in the process. Again, I simply am at a loss to explain this incredible blockheadedness on their part. Maybe they will make it back on the way up when crude finally does bottom out but as to when that will happen, who knows? In the interim, they managed to miss one incredible profit making opportunity by misreading or ignoring the price chart and the technical price patterns.

I guess you can call it a case of "Hope Springs Eternal" when it comes to the large specs and their bullish oil posture because other than that, I have no explanation why they are so other than the fact that in the past, crude oil tended to hit spike lows and then rebound. The problem is that this time around, US production is showing no signs as of yet of being sharply curtailed - at least curtailed enough to make a dent in the supply glut.

I understand the knee-jerk reaction to middle East turmoil and tensions but unless these sort of flare ups actually result in a drop in crude oil production or supplies reaching the world market, blindly buying into a bear market is a counterproductive "tactic" for most traders. The same goes for perennial bottom fishing.

If crude oil is to actually produce a solid bottom and enter a bull market, the charts will show it. One does not have to try to nail some sort of "exact bottom" in the hope of bragging about some penchant for prophetic market insights. In a trending move, pulling 70%-80% out of the trend is more than sufficient to make good profits. One DOES NOT NEED TO buy exact bottoms ( impossible on a consistent basis) or to sell exact tops to make money in these markets.

Remember that.

I am still being very careful in these markets at this time. There remain many conflicting cross currents which can buffet these markets in opposing directions. As said many times here, good traders are more concerned about NOT LOSING their trading capital than they are of missing bottoms or missing tops. Leave the latter for the rookies. When the time comes to be aggressive, you can then push for all it is worth. In the meantime, exercise PATIENCE, something most individuals do not have when it comes to trading and one of the main reasons their careers in this profession are so short-lived.

 

Back to homepage

Leave a comment

Leave a comment