DX

[hardnox]

Dollar index close to breaking out of a nice 5 wave triangle to the upside.

A thrust would target the 97ish area with ultimate targets in the 102 range.

A headwind for the commodities.

I can envision a perfect storm scenario where oil breaks the 43ish support and heads into the 20s and the USD goes on a blowoff tear. Paradoxically that might be a bit positive for stocks as hot money flows into the US (and feeds the dollar bubble further) but would inevitably end badly somewhere down the road.

[nwobcw]

that could take corn down to 2 bucks

[Hobbyfarmer]

Hardy:  me thinks u are sitting too close to your computer screen,  backup about a foot and a half.

First off the USA $ is NOT rising, it just isn't falling quite as fast as some of the others.  Gold and silver has not and is not crashing and burning in relationship to the $.  The price of real goods such as vehicles and machinery etc are NOT being priced with a smaller US$ # attached on the price tag. 

If oil was going to 20 it would already be there. With the devaluation and printing that has and is still going on oil is on a real basis already at that $20 you talk about. If in fact it go's to a 20 we're all so screwed. We will be in a full depression world wide and fiat money will have no value. It will usher in a new "dark age"  this time with fiefdoms with nuclear weapons.

[hardnox]

I think it is generally wise to check your political beliefs at the door when looking at markets.

The Death of the Dollar/Hyperinflation story is one of the most popular hoaxes of recent times although, granted, it probably will come to pass someday. 

On oil, I can't predict a whole lot of the variables. But production continues to exceed consumption. There's a big forward carry in the market that incentivizes hedged storage. That can theoretically continue until the storage is all full. Or something changes on the supply side- presumably either because the gulf boys blink or political turmoil cuts production somewhere.

The drop in rig count isn't going to affect production much for a year or two. The present situation highlights the fact that $50 WTI/$60 Brent is not below the variable cost of production for nearly any current online production.

I don't know what the number is that shuts some of that down but if the storage is filling up and surplus production continues,  the market is going to tell us.

BTW, as I was writing this the dollar popped through to what would be a breakout if sustained. The gold rally flopped as did a little bounce in crude. Could be game on.

PS. I expect the Wall Street boys to keep buying crude and salting it away, as they did in 2008, for quite a while longer, so don't see a run on support as an imminent thing. The removal of the immediate physical surplus provides a degree of support.

PSS. the $T or so of junk debt that has financed the unconventional oil and gas boom might approach the level of systemic risk but I doubt it.  In the housing bubble, the whole subprime space only had a real value of a couple $T but in that case it was a matter of having been sliced, diced, rehypothecated and spread around like poison through everything. My hope and belief is that isn't the case here.

PSSS. Given the conditions in the crude market that I've described, there ought to be market indicators that would give a tip as to when storage is getting closer to being filled. Tanker rates, tank lease rates, etc. I think I'll work on that.

[Palouser]

All the conventional 'wisdom' about how the market works in terms of our economy and the $US has been wrong - and I DO believe it was because those beliefs were needed for political mantras that didn't make any more sense then as now.

Throw all that conventional 'wisdom' out the back door. I repeat - it was wrong then, wrong now and will be in the future.

Time to actually be realists and look around. The middle class is played out and isn't going to return for a revival because the conditions for its becoming the economic engine it was no longer exist. Farmers have a tough time with this as we've been the favored during this mess. The Fed is a sqiuirt gun in this economy. Congress is the dog lying on the freeway median taking a nap while Timmy is trying to stay alive in the sinkhole. The dog looked at the situation and went some place where the noise was drowned out and went back to sleep.

[Red Steele]

Buying oil would seem to be a good play. Which stocks are out there that would be directly correlated to the price of oil, and what kind of money does it take to lease a tanker and buy the oil in it?

Maybe Oil and tankers would be a better investment right now than farmland.

[hardnox]

The big boys are buying inventory and hedging it into the positive carry. They aren't taking flat positions to a large degree yet.

If they've hedged a good carry they don't care if it goes to $20, actually all the better for them as the margin cash rolls in.

If 2008-9 is any indication, at some point they will begin to selectively lighten hedges and try to cash in bigger. That could be at the point of some geopolitical inflection or as they sense it has finally washed out.

If you want to just speculate on a flat price bottom, buy futures or calls and rots-o-ruck. Could be right on account of the marble landing in the right slot but that's about it.

I don't think that most oil stocks are yet fully pricing the extent or duration of this thing. If I miss it I miss it although I want to see blood in the streets before playing that hand.

[Nigel]

UPDATE 1-U.S. oil rig count falls by 33, smallest drop this year -Baker Hughes - RTRS  27-Feb-2015 13:23 Feb 27 (Reuters) - The number of rigs drilling for oil in the United States fell 33 this week to 986, the smallest drop since the beginning of the year and a potential sign that a sharp decline in drilling could be slowing, a weekly survey showed on Friday.

[nwobcw]

I heard on the news the oil rig count in Ohio is increasing