What an "impressive" recovery we had last week.
After starting out down 750 Dow points we took 500 of them back overall, which gives us a still-constructive picture on the weekly chart – much better than the dreaded head and shoulders formation we would have had if we had finished around 17,500.
So that should make the chart people happy and this morning the Futures are up a bit, even though oil is down 2.5% as Goldman Sachs took advantage of a sleepy Monday Morning to come out with a MAJOR DOWNGRADE ON OIL that calls for $41 oil in 3 months, down from their previously totally wrong forecast of $70 (for WTIC).
Since GS was "only" off by 42% in their previous forecast, of course their current forecast is moving the markets as the beautiful sheeple stampede out of long positions. We're thrilled to see GS send oil to new lows as it makes it cheaper for us to buy longs. Last week alone 35 rigs were shut down at Bakken (61 overall) and, as we already calculated in our ongoing oil study, the average rig pumps 1,000 barrels a day, which means 61 rigs takes 427,000 barrels out of inventory starting next week.
GS knows this and they know the bottom is much closer than April – they just want to force the retail buyers (including their own clients) out of long positions so they and their preferred clients (the top 0.01%) can load up on longs and make a fortune when oil does come back.
You can see on their chart (left) that they are still projecting a $65 average for 2016 but GS knows (as do we) that the average investor has more like a 3-month time-frame, at most, and has no interest in what will happen a whole year from now – even if it could make them 50% if they simply make an investment now.
Fortunately, at PSW, we teach our Members not to be sheeple and, as I often say to our Members:
"We don't care IF the game is rigged as long as we can understand HOW the game is rigged and place our bets accordingly."
This is just a scam – a con that is being played on energy investors that is giving us fantastic opportunities to buy companies like BHI ($56.47), RIG ($15.83), XCO ($1.90), TOT ($48.64), etc – as well as actual oil ($47 on /CL), natural gas ($2.825 on /NG) and gasoline ($1.30 on /RB) for some fantastic LONG-TERM gains.
We were just going over some trade ideas from last year, when GS was telling people oil would be $150 per barrel and chasing the sheeple INTO it at $103.50 and it did, in fact, get to $107.68 in June but we remained relentlessly short the whole time and, ultimately, the position we called a short on on Dec 15th, 2014 (2 short oil Futures at $103.50 for $9,000 in margin) gained $110,580 (1,228%) as of Friday's close. So now, to summarize, I'm saying I like oil long for the next 12 months.
Remember, I can only tell you what is going to happen and how to make money trading off this information – that is the extent of my powers - the rest is up to you. Keep in mind that two oil contracts shorted at $103.50 were down $4,180 each ($9,360, down 100% on margin) when oil topped out at $107.68 in June, so this kind of trading is not for the feint of heart. As we discussed in last week's Live Webinar, however, we have techniques that help us ride out the waves – and make even more money along the way, profiting from the volatility.
We don't know for sure that this is a bottom, things may go lower from here but, if they do, we will want to buy more, not less. With many stocks still trading at all-time highs (GMCR, for example!), now is an excellent time to take some winners off the table and make some long-term investments on beaten-down materials plays. We have some on our Buy List (Members Only) and we'll discuss some in Tuesday Live Webinar at 1pm (Members Only).
We have a lot of Fed speak this week as well as the start of earnings season – interesting times indeed:
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