Why does the overall market fall after oil stocks do well? A rising oil sector is a rise in the costs of goods and services - a hidden tax on profits, if you will. But the opposite is also true, a drop in OIH relative to the S&P500 and you have the ingredients for a bull move in the S&P500.
What are the magic levels of outperformance to watch for? Plot the ratio of these two markets and watch for a roll-over from an extreme. Sometimes it takes longer for these trades to set up and it will try your patience and stop you out a few times before the big trade sets up finally. Be patient.
Always keep an eye on this pair to see when bubbling euphoria in the prospects for energy service companies rings the bell for you to take your money off the table in the overall market.
There are a few good examples in this 2006 to 2010 time period on this chart. See if you see the warning signs.
Regards,
Tim 5/29/2014 1:45AM EST
What are the magic levels of outperformance to watch for? Plot the ratio of these two markets and watch for a roll-over from an extreme. Sometimes it takes longer for these trades to set up and it will try your patience and stop you out a few times before the big trade sets up finally. Be patient.
Always keep an eye on this pair to see when bubbling euphoria in the prospects for energy service companies rings the bell for you to take your money off the table in the overall market.
There are a few good examples in this 2006 to 2010 time period on this chart. See if you see the warning signs.
Regards,
Tim 5/29/2014 1:45AM EST
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