Tag Archive | futures

Volatility with Oil – is it the Next Global Crisis?

SmartStops wants to remind you that it is important to stay protected in the markets.   There’s alot going on within the underlying infrastructure that you may not realize.

from inside flap of The Vega Factor: Oil Volatility and the Next Global Crisis  by Kent Moors

“There is a sleeping dragon at the heart of the financial system. Soon the beast will awake and rear its terrible head, and we will look back on the days of the subprime disaster with nostalgia. In this riveting book by oil industry expert Kent Moors, you will meet the dragon he refers to as oil vega, and you’ll discover why it poses such a grave threat to world economic and political stability.”

“Those familiar with the options and currency markets will recognize vega as the term traders use to denote the rate of price volatility. Expanding upon that traditional usage, Moors coined the expression oil vega to describe the dramatic increase of price volatility seen in the oil markets over the past several years.  In The Vega Factor, he describes how, contrary to popular belief, the current environment of runaway volatility in the markets is not the work of diminishing reserves, manipulation by oil producing nations, or increased competition among nations. Rather, it is a result of a structural flaw in the trading system itself.

Crushed by Cotton

By Raghu Gullapalli, contributing writer, SmartStops.net

Last week was very rocky for clothing retailers, Ralph Lauren, Aeropostale and almost cataclysmic for the Gap.

The Gap (GPS), which is the 800 pound gorilla in the clothing retail space, presented poor earnings and cut its outlook for the rest of the year. During their conference call, it became clear that the retailer has been having a hard time managing the margin squeeze caused by the spike in
commodity prices, particularly cotton. In addition the company experienced weaker sales, which has been only exacerbated by the high cost of oil. The stock traded down $4.07 to $19.22. The stock is trading below its 55 and 210 day moving averages and it is unlikely to break this new downtrend without a significant catalyst from the larger markets. The Smartstops.net short-term stop is at $18.61 and the long-term stop is at $17.84.

News of the Gap, was compounded by the poor results of Aeropostale (ARO). The teen retailer’s guidance for the quarter fell well short of market expectations amid dropping sales and the afore mentioned rise in rawmaterial costs. On Friday ARO was down $3.04 at $18.30. It is well below its 55 and 210 day moving averages. And will more than likely need a significant market catalyst for that to change in the near term. Smartstops.net has the short-term stop at $16.40 and the long-term stop is at $15.68

This news created waves in the market as other apparel companies, also affected by the same rise in cotton prices saw their stock plummet as much as 5%. Polo Ralph Lauren (RL) which has earnings on May 25th  dropped precipitously, but is being supported above its 55day moving average.  SmartStops has the short-term stop at $126.17 and the long-term stop at $123.51.

Fortunately this news has not caused the SPDR S&P Retail ETF (XRT), to weaken significantly. It is still being supported by the 55 day moving average and is well above its 210 day moving average. SmartStops has the short-term stop of the ETF at $51.60 and the long-term stop at $50.74

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