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John Gilluly  

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  • Interesting Parallels Between The 2009 And 2015 Oil Bear Markets
    Wed, Mar. 18 SPY, DIA, QQQ 26 Comments

    Summary

    • March, 2009 - North American rig counts fell (- 50%) below their Autumn highs. Oil prices recovered. March 20, 2015 (est) - the same rig count has fallen (-50%).
    • In July, 2008 the US dollar began a 24% parabolic rise, peaking in March, 2009; in July, 2014, the dollar began a 26% rise. It peaked on March 16, 2015.
    • These two 9 month parabolic rises in the dollar are 2nd and 3rd in line behind the 31% rise of 1984-85 -the massive Fed tightening cycle of the early 1980s.
    • On March 15th of each year, the refinery cycle begins a 6 months upswing which adds 1.35BL bbl/day of crude to its inventory for "summer gas" conversion.
    • In 2008-09, crude closed below $40/bbl, three times - a month apart - and after each brief drop into the mid $30s, crude rallied 46%, 37%, and 36% respectively.
  • It Ain't Over 'Til It's Over - The Oil Bear Market At The Bottom Of The 8th
    Fri, Mar. 6 USO 5 Comments

    Summary

    • The bear market in crude oil is now in its 9th month.
    • U.S. oil inventories have risen to 444ML barrels, the highest level in 80 years. 69ML barrels (18.4%) were added to inventory in just the last 10 weeks.
    • The Oil Volatility Index (OVX) has begun dropping from multi-year highs, indicating this bear market may soon be over.
    • In 2008-2009, it took 3 attempts before the crude oil bottom was finally "in". And prices afterwards continued to be Mr. Toad's Wild Ride. Past as prelude in 2015?
    • The Gold to Oil Ratio may have called the bottom of this Oil bear market - to the day - as it did in 2009.
  • Don't Rely On Your Emotions To Trade The Oil Patch
    Tue, Jan. 20 OIL, UCO, USO 6 Comments

    Summary

    • An inflection point has been reached in oil's valuation per barrel.
    • The Oil/Gold ratio at this level has historically confirmed a trend change.
    • The supply/demand news cycle is beginning to turn.
  • OVX Volatility And The Oil Panic Of 2014
    Dec. 31, 2014 LINE 22 Comments

    Summary

    • The ratio of crude oil's price (WTIC) to its volatility (OVX) has peaked and/or bottomed at turning-points in the oil cycle.
    • In 4 of the last 6 years, this turning point has been around the first of the year: 2009, 2010, 2011, and 2014. We are again near peak (Jan, 2015).
    • After an initial surge above 57 upon news of recent oil-inventory builds, oil's volatility (OVX) may have broken support: first at 53, then at 50 (12/31/2014).
    • Linn Energy (LINE) - or its companion trading stock (LNCO) - are well-positioned to advantage of an eventual turnaround in oil prices.
    • More conservative investors could choose XLE, and for more aggressive investors - the 3x leveraged Gas/Oil index (GASL).
  • Has The Market Called A Bottom For Crude At $54 BBL?
    Dec. 19, 2014 XLE 26 Comments

    Summary

    • The market is a forward discounting mechanism.
    • Stocks across the Oil Patch did not follow Crude Oil lower when it fell to $54/bbl on December 16, 2014. Instead, they vaulted to the upside.
    • The Saudis' recent move is seen as "wildly dangerous" to price stability. It encourages demand and reduces supply now; but fosters an explosive upside to prices in the future.
    • The upcoming reduction in US rig count and capex will severely curtail domestic shale-oil production growth in 2015.
    • March, 2015 will likely be the inflection point for crude prices.
  • It's Time To Buy The Oil Panic Of 2014
    Dec. 17, 2014 UCO 46 Comments

    Summary

    • Oil is at a point of extreme undervaluation. There have been only 4 instances in the last 70 years when oil has been this undervalued relative to Gold.
    • World over-supply has come from the Americas. Recent Capex and rig-count cuts announced by the major North American drillers will reduce crude oversupply by 1H2015. Legacy wells also will deplete.
    • The oil service sector is in the process of creating a bottom. A bottom is a "process", not a single event.
    • It does not matter where the final crude price falls to. By buying incrementally at this level, investors will bulk their entries near the lower 20% of crude oil prices.
    • Reduced energy costs will stimulate the economy, especially individual families' free cash flow, and will increase oil consumption relative to supply.
  • Emerging Markets At 5-Year Lows Are A Blue-Light Special
    Dec. 12, 2014 EDC 7 Comments

    Summary

    • Emerging Markets have hit multi-year lows because of the oil crisis, political fallout, and volatility in their markets. They have also fallen victim to end-of-year tax-loss selling in the US.
    • However, the long-term effects of lower crude costs should increase these countries' domestic industrialization, car sales, and reduce overseas shipping and transportation costs.
    • Each time emerging markets have sold down to this level since the financial crisis, they have rallied hard in the coming months.
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals
    Dec. 12, 2014 GASL 116 Comments

    Summary

    • The prices of crude oil and gasoline have dropped 47% since summer.
    • The catastrophic sell-off in crude oil and the oil-services sector is now an opportunity to be traded. It is based on panic-selling; not industry fundamentals.
    • The 2014 oil-sector sell-off rivals the Nasdaq bear market of 2003, the 2008 Financial Crisis, and the 2008-2011 Housing Crisis which followed it.
    • The drop in the price of crude oil will prove unambiguously positive for the consumer economy, and for all industries that use crude oil to make their products.
    • The yield curve - the precursor of all US recessions - remains steep and positive for the US economy.
  • Is October's Storm Nearly Over?
    Oct. 12, 2014 SVXY 34 Comments

    Summary

    • The VIX volatility index has risen eight times above 20 in the last 34 months. It is currently at 21.24.
    • Past spikes in the VIX above 20 have presented superb entry-points to go long the ProShares Short VIX Short-Term Futures ETF.
    • The SVXY (Inverse of the near-month future contracts on the VIX volatility index) has formed a 4-year channel with clearly-demarcated highs and lows, and has now touched its extreme lows.
    • Severe selling days are often clustered at the end of a large down move and mark the moment when prices have fallen low enough to attract new buyers.
    • To follow this trade in time, see Updates at end of article.
  • In The Wake Of Iraq, Parsing Putin's Next Move
    Jun. 27, 2014 ERUS, RSX, RSXJ 2 Comments

    Summary

    • The sudden turmoil in Iraq places a strategic premium on the safety and stability of Russian Oil & Gas exports to Europe, South Asia, and the Far East.
    • Russia has much to gain ($) by softening its Ukraine policy and actively promoting peace along its western borders with Europe.
    • Domestic and foreign capital flight from Russia has diminished, but a lack of trust is now prevalent among potential investors and former political allies.
    • Current valuations of the energy-laden Russian Stock Market do not reflect the recent 8% rise in Brent Crude (Spring, 2014).
  • Counting Russian Cards
    Jun. 4, 2014 RSX, RUSL, RSXJ 9 Comments

    Summary

    • The Ukrainian conflict has created a significant, measurable sentiment cost for the Russian stock market.
    • A sociological barometer of sorts is in play with which to view (and trade) the economic impact of the conflict.
    • Peace will prove uber-bullish for Russian equities.
  • Calm Before The Storm
    May. 29, 2014 SVXY 153 Comments

    Summary

    • The VIX Volatility Index is currently at a 7 year low.
    • There have been 10 volatility events (spikes up or down) in the last 18 months; each one presenting a superb opportunity to go long or short the SVXY.
    • The SVXY (Inverse of the near-month futures contracts on the VIX Volatility index) is approaching the extreme upper edge of its trading range.
  • New 13D Filing Reveals More Dilution Ahead For Plug Power
    Mar. 24, 2014 PLUG 144 Comments

    Summary

    • Schedule 13-D: filed on March 19, 2014 for event of March 8, 2014. Details to follow.
    • On May 16, 2013, Air Liquide (ALIAD) acquired 10,431 shares of the Issuer’s (PLUG) convertible Series C Preferred Stock for $2,595,400.
    • On May 8, 2014, Air Liquide can convert this $2,595,400 investment into 10.97189ML shares of common stock (PLUG) - currently valued at $68,135,436 (March 19, 2014).
    • March 11, 2014: Plug Power reported 106,340,501 shares outstanding. If/when Air Liquide's shares are converted, the total count would likely rise to 117.3ML outstanding shares.
    • Similar dilutions lie ahead because of the warrants included in Plug Power's many equity raises of the last 16 months.
  • Playing PLUG Power
    Mar. 16, 2014 PLUG 152 Comments

    Summary

    • Trading in Plug Power has become synonymous with online gaming. It is not "Investing".
    • How the game of PLUG is played.
    • Conference calls and cheerleader news releases provide infomercials for PLUG.
    • Shareholder dilution and exponential losses keep the game afloat.
  • A Requiem For Plug-Mania
    Mar. 13, 2014 PLUG 106 Comments

    Summary

    • On Monday, March 10, 2014, PLUG Power's volume/price soared - trading 205 ML shares or 2.5x its float; up 25%.
    • On Tuesday, March 11, 2014, PLUG Power dropped to $6.03; trading almost 3x its float - 243ML shares; down -41%.
    • On Wednesday, March 12, 2014, PLUG Power traded as high as $7.30 (up 22%) on 1.5x its float - 141ML shares.
    • Before its epic fall on March 11th, trading in PLUG had approached outright gambling as investors threw all caution to the wind. Ascent was clearly parabolic.
    • Shares responded violently to analyst's characterization of PLUG as a "casino stock."
  • The Trading Characteristics Of Market Manias
    Editors' Pick • Mar. 9, 2014 BLDP, SLV, WMT 90 Comments

    Summary

    • A simple exposition of manias and what they have in common.
    • Analysis of the Nasdaq, tech, silver, and fuel cell manias.
    • A comment on Plug Power's new Wal-Mart Contract.
    • A true story from the 1998 tech mania.
  • Pulling The PLUG On The Fuel-Cell Mania
    Editors' Pick • Mar. 7, 2014 PLUG 393 Comments

    Summary

    • Comparison of solar stocks from 2006-2013 with the current fuel-cell rally.
    • The pro-rated (overall) cost of a technology is what finally drives its adoption.
    • Why was Plug Power not acquired when its price was compelling?
    • Current peer-reviewed research: "Economic comparison of fuel cell powered forklifts to battery powered forklifts".
    • Discussion of charts & price surges in Plug Power and Ballard Power Systems.
  • Brookfield Looks Ready For Another Leg Higher
    Feb. 28, 2014 BRP 4 Comments
  • Homebuilder ETF Surges To New 52-Week High
    Feb. 26, 2014 BRP, DHI, HD 2 Comments
  • Trading The Ranges In M.D.C. Holdings And Tri-Pointe Homes
    Feb. 19, 2014 MDC, TPH 8 Comments
  • New Home Construction Ramping In The Chicago Metro Area - 2014
    Editors' Pick • Feb. 6, 2014 BRP, DHI, HOV 8 Comments
  • Is It Safe To Return To REITs?
    Feb. 3, 2014 AGNC, HTA, IVR 30 Comments
  • Tapering Could Be The Investment Event Of The Year
    Feb. 3, 2014 BRP, DHI, KBH 2 Comments
  • Is A Welcome Surprise Coming For Mortgage Rates?
    Jan. 31, 2014 AGNC, KBH, NLY 2 Comments
  • Homebuilders Continue To Confound The Bears
    Jan. 29, 2014 BRP, DHI, KBH 26 Comments
  • A Picture History Of The Housing Recovery
    Jan. 23, 2014 BRP, DHI, HOV 28 Comments
  • Builders Prepare For A Blowout Spring Selling Season
    Jan. 17, 2014 PHM, TOL, LEN 12 Comments
  • Are Bonds On A Collision Course With Housing, History And The Fed?
    Dec. 2, 2013 IYR, TLT, VNQ 25 Comments
  • Home Builders Immunize 2014-15 Growth Prospects Through Select Metro Markets
    Nov. 17, 2013 BRP, KBH, MDC 3 Comments
  • What A Banana Republic And Monetary Policy Can Teach Us About The Future Of U.S. Housing
    Nov. 11, 2013 IYR, VNQ, TOL 25 Comments
  • Toll Brothers Overpays For Shapell, But Reports Blowout Preliminary Earnings
    Nov. 11, 2013 TOL 3 Comments
  • A Simple And Timeless Way To Trade The S&P 500 Successfully
    Editors' Pick • Nov. 8, 2013 SPY 149 Comments