The long term fundamentals of oil appear strong. I've had a position in an oil sands major since last spring, and a junior since the fall. However, what kind of decline do you see the oil sands sector having if the broader market enters the bearish phase you foresee? Fyi, there is a fairly informative discussion board on the oil sands at Silicon Investor:

http://www.siliconinvestor.com/subject.aspx?subjectid=55547

"Geez, this Oil & Gas trade is wearing on me, and if we don't get a bounce in the next 24 hours, I may just boot the whole thing to the curb." Stephen Veta 2/15/06 11:54 AM

"Expecting Panic Selling in Energy
With the drop in crude accelerating, I would expect some panic sales in energy soon.
Is a bid wanted?"
Doug Kass 2/15/2006 12:32 PM EST

"Crude oil now responding to bearish inventory data and nat gas approaching a $6 handle. All this and the mo-mos are still very long the energy complex. Also, few if any sell side analysts have downgraded the sector. Not painful enough yet for downgrades? As prices decline, I expect many energy bulls to change their tune and go into "sell" mode. Position: short crude oil"

Robert Marcin
Crude Decline Accelerates
2/15/2006 12:35 PM EST

Rydex Energy Assets now 30% below 50 day average as traders hit the exits.

Is the contrary opinion (negative) on oil becoming consensus?

stockman-

Charts say it could go further now that it is breaking trendline. I am waiting for a reversal to show on the charts before entering.

Long: CASH

MarkM-

Educate me. I'm looking at a chart of the XOI on a log scale. It appears we are testing the low end of a channel we have been in for 3 years. What are you looking at when you say we have broken trendline? Thx.

stockman-

I have up your chart (XOI) but on a shorter timeframe and it shows latest channel penetrated. I'll take a look at 3 year. (But I did "weasel" and say "is breaking". It all depends on what the meaning of "is" is, remember? :) )

I also have that trend break down, but I think it just might be a fake-out move down. If today's XOI candle ends up with a positive body, I will start looking for some confirmation signals for a long on something in the Index- until disproved, of course.

In cash for now.

stockman-

I tried but cannot draw a channel line with any degree of accuracy from a three year chart. I can with a two year chart. So my chart shows penetration.

Can regain line to confirm trend, just as $USD did recently. That chart, BTW, looks BULLISH to me. As opined previously, I am thinking Bernanke raises in May as well. I think the March raise is a given with his remarks and Moskow's remarks. So all that is playing into my decisions on the markets.

MarkM - If you have access to StockCharts monthly charts, take a look at the monthly linear (meaning not log) XOI chart since 03/01/02 with a BBand(8,2), and with a Fib drawn from the pk low in April 2005 to the pk high in Jan 2006, and then draw a short up trend line connecting the low of April 2005 past the low of October 2005.

I'd say that there is a strong potential for an upswing before the end of Feb. If not, then perhaps at around 900. I always wait until I get a confirmed signal, though.

If energy stays down- that has to be taken as bullish for the rest of the market, even miners. So maybe I see gains slip away in that sector and benefit in the others? That's OK, I continue to believe that energy and metals are a required overweight if one has to be long with most of your capital. Right now my energy names are 5 up / 5 down, VLI a stand out to the positive. Now, the miners are more of a concern- a beating there. Other natural resource plays- IP, POT, CCJ all look OK. Industrials IR, BWA, PLL, CAT also holding well. Health care- BSX, STJ, MDT, JNJ good, SYK, UNH not as good. Consumers- AVP, ACV, DIS and SBUX all good. Telecom basket flat overall excluding VZ, which is a standout.

long- diversification

TRC also stepping up.

long TRC

spot-

ABC correction provides S/T February bump?

MarkM - Using an ABC correction on a monthly chart is a lot longer period of time than I am accustomed to use for trading, 'cause I think the "correction" period on a monthly chart would be more in tune with Quarterly moves rather than with the few days left in Feb. Also, an ABC pattern from the last top would indicate a change of trend to downward, but I am still thinking Oil will continue to move upward (with zigs of course).

Actually, I am looking for a confirmed indication of an actual upswing starting out from this currently still-developing low on the monthly chart. It might not come any time soon, but Crude Oil seems to be following its normal Seasonal Pattern so far, and that seasonal calls for a strong move upward from the last of February/first of March.

The XOI index doesn't have to correlate exactly with Crude, but the overall XOI chart is still positive in that the last Hi was a higher Hi, and the current Low, so far, is yet to be a lower Lo. Additionally, I just can't make myself believe that more people than just me know all the above and are nervous shorts. A relatively small "paint the tape" action going into the end of Feb and continuing through the end of March would take care of most of the shorts, but then again it might not.

What would make change my mind about continuing to look for an upswing? A lower low below 900 for the Index might. Would I try to trade a possible "dead cat bounce" here? Damn right! but that's just my style of trading.

You might want to keep an eye on Bill's recommended RSI(7) andRSI(14). If the (14) stays above 50_ and the (7) crosses back above 50_ on the weekly chart, I might even get a gleam in my eye.

Please don't take any of the above as "preachment" to you. I confess I am long-winded in my writing style, but it helps me to think more carefully (fwiw)-gg!

spot-

I was trying to anticipate where you were going w/o carefully reading your post. I didn't pull up the chart. Weekly more appropriate for ABC as you suggest.

Thanks for the walk-through. I am in agreement that liklihood of tradable bounce could exist here soon. Similar to gold I believe.