16
Feb

Wrap – Week Ended 02/15/08 (In progress)

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Stocks outperform broader market. As we talked about last week, the service stocks were due for a rally and they definitely outperformed this past week. Part of this was attributable to rising commodity prices but part of it was further commentary from producers that while service pricing was somewhat softer, demand would be strong and that prices would only go so low.  

CFTC Show Net Short Position Hits All Time Record High. Just taking a look at the weekly report from the CFTC, which is good only through last Tuesdaythe net short position had climbed to -131,726 contracts as reported on the Futures and Options combined report.

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As you can see from the preceding graphs, that's a record but the report looked very weird:

  • Longs actually climbed 27,000 contracts to 103,000 contracts, levels not seen since the end of 2006. 
  • Shorts jumped on the inexplicable rally in natural gas prices driving the short position up a whopping 40,000 contracts to 235,000 also an all time record (and my data goes back to 1995).
  • Remember, this activity occurred as of Tuesday and the big gains in natural gas for the week didn't occur until Thursday.

Usually a few thousand contracts change hands week to week, maybe 10 or 15,000 contract shifts but not numbers like those above. So what caused this strange behavior?

  • A giant gas storage withdrawal? Nope, at 120 Bcf, last week's was "in-line" and a far cry from year ago withdrawals.
  • Looming Cold Weather? I don't think so, it may have been colder this week but not cold enough to set a positive comp versus year ago results.
  • How about the death or at least severe bludgeoning of at least one Houston based hedge fund? Aye, that's the ticket. There are very likely to be more of these with such a large short position going the wrong way for so many.  

So what am I doing about it? I bought puts on UNG (the natural gas ETF) on Wednesday and added to the position on Thursday afternoon (at a higher strike). My sense is that once the forced short covering is done, traders will be hard pressed not to take profits in the face of the approaching shoulder season.

 

So How Are We Doing In February So Far? Were it not for some poorly chosen words on the part of Ben Bernanke I would likely pulled the rabbit out of the hat on those last two red ones on the list below. Bet ya Ben doesn't get asked to stick around when the administration changes hands. 

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Drybulk Highlights from Valentines Day - Seeking Alpha ran part of a piece the other day on Drybulks so if you missed it here's the heart of it.

It's a 3 day weekend and there's lots more to come so check back frequently ... 

3 Responses to “Wrap – Week Ended 02/15/08 (In progress)”

  1. 1
    zman Says:

    Apologies for the inconvenience with the site this am but we had some difficulties with an upgrade last night and were forced to go to a backup this morning. Comments over the week end were lost but I saw them before they went into the digital abyss.

    Nicky – I see no reason for NG up again today but it could be the rumor of another hedge fund blow up.

    Gaamblor – i agree it does not explain it but I think there are thought to be more and nearer term losses which could be prompting the covering.

    K- Alaron blew up a refinery? greatttt….will look into.

    Have a great day off everybody and if you are having trouble with any odd looking errors try clearing both your cache and your cookies.

  2. 2
    aaatest Says:

    test test test

  3. 3
    texana Says:

    z, i was about 20 miles away from Alon’s Big Sring,TX refinery when it exploded today. Its still burning and will completely destory the cracking unit. They were 4 people injured and no known deaths at this time. Thats the good news the bad news is that it will be a long time before they will be able to get this 70,000 bbl refinery back up & running.They supply all the 7-11 &fina conv stores in west texas & se new mexico The interesting thing is that all of the oil we sale is shipped via pipeline to Galveston for processing. Most of the crude processed here was low gravity high sulphur oil which is vlo’s niche. oh yeah that is Alon Israel Oil co.,Ltd

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