Monday October 13, 2014

$SPY Closed $FFIV this morning at 107.68 on an Opinion downgrade.  Also, as a hedge I traded the .SPY141220P191, entered at 9:40 AM at 5.93 and averaged out at 9:51 AM at 6.44.  There are only 4 remaining positions in the Alpha One Model Portfolio at this time.  Until my market models begin to indicate a bottom forming this will continue to be my daily activity.

Here in the Carolina’s the price of gasoline has dropped significantly of late as I am sure it has in your regions across the United States.  The first six months of this year I enjoyed significant profits on the energy holdings which I held but over the past three month’s I have rotated out of all those positions. 

There are several articles which have been included below for your browsing providing current insight as to the reasons why this occuring, but summarily it appears that OPEC producers lead by Saudi Arabia and Iran have decided to price out of the global equation the potential competition from deep-water projects in the Gulf of Mexico and U.S. shale production.

“….The Saudis appear to be betting lower prices – which could strain the finances of some members of the Organization of the Petroleum Exporting Countries – will be necessary to pave the way for higher revenue in the medium term, by curbing new investment and further increases in supply from places like the U.S. shale patch or ultra-deepwater, according to the sources, who declined to be identified due to the private nature of the discussions.” - Reuters, “Privately, Saudis tell oil market- get used to lower prices” by Ron Bousso and Joshua Schneyer

As we begin to see a bottom forming in the near term it would be wise to do significant fundamental analysis on any names which may come to the top of your list in the Energy Sector.  I would be looking for indications of the price sensitivity levels which their operating margins are subject to failing, looking for the price point where shutting down would make more sense that moving forward.  

"BoA oil analyst who predicted downturn now sees floor" 

Speculators Push Oil Into Bear Market as Supply Rises 

Cramer on oil: Sowing the seeds of its own demise

Exclusive - Privately, Saudis tell oil market: get used to lower prices

OPEC tensions, lower oil prices may hit oilfield firms, analyst says 

What's causing decline in crude oil: Dan Dicker

Below $3 a gallon? Gas prices continue to plunge

Oil Bear Market Tests OPEC Unity as VenezuelaSeeks Meeting