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Watch Out: A Correction in Oil is Coming

Bunk--

While I too believe some correction-- >10% and more likely 15-20%+ is in the cards for crude prices (most likely shortly after 100 is breached) this methodology is flawed. DIG's largest holdings are the big oil companies which have underperformed lately. This underperformance is due to poorer margins relating to refinery and other operations. Not all oil companies will continue to kick butt as the price of oil soars. IE--I own some Oil & Gas Royalty Trusts which will often hedge prices with all sorts of derivatives. In order to put a floor under them in case oil drops they often have to put a ceiling on profits as well. I know that this example relates to Royalty Trusts and not big oil, but the point is that companies that make money in the oil market don't move tick-for-tick with the price of crude.

It would be interesting to back-test this method with more data...anyone?