May 29, 2008

If you want a perfect example of the dumb money getting into oil look no further than when oil inventories report was released today, and there was an instantaneous price increase, only to see those suckers who bought on the report indicating an increased demand, see the gains just as quickly disappear. There is undoubtedly and overzealous behavior and that usually occurs when the uninformed ‘crowd’ starts entering the picture with no clue as to what they are doing. Like we said before, when this bubble-rally comes to an end, expect the bulls to try to do everything in their power to make one more attempt to push oil higher, only to see it come crashing down again. This will be most noticeable when a lower-high is put in on the charts.

As for the indices today, the action was much better than what had been seen in recent days. Bulls seemed much more confident when oil yet again retreated in price. This was enough to inspire bulls to deploy their capital much more rapidly. In fact we will look to add more shares to some of our existing positions. NASDAQ charts are looking really good – perfect bounce off of the trend line and we are now approaching the highs from last month, in which the bulls will need to do everything in their power to push prices beyond those levels. But don’t be surprised if the bulls quickly run for cover if oil spikes early on in the morning. So keep a tight grip on your positions. Let’s finish the week on a positive note.

Here’s the NASDAQ and S&P Charts…