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Buy United States Oil – Discovery Of Support Here

United States Oil (NYSE: USO) seemed to discover support Monday after a week’s slide with energy commodity prices. After the disappointment from OPEC on the supply front, more recently we’ve received good news on the demand front. Fresh economic data from China appears to show the start of stabilization and data Monday on the Eurozone showed a pickup in growth. Given my view that supply side concerns are well-priced in and could be overdone if Iran fails to come to fruition as many expect, demand improvement should serve USO long-term. Finally, Russia’s foray in the Middle East and its tensions with Turkey also present a near-term upside catalyst I believe not incorporated in price today. The United States Oil (NYSE: USO ) had an important discovery Monday; it found support. Some are pointing to technical analysis for reasoning, but there are fundamental factors to point to. Energy prices have stabilized for now thanks largely to supportive economic data out of Europe and China. Still, given recent supply stubbornness, energy could require a geopolitical catalyst to really get going to the upside over the near-term. Because I give weight to that possibility, I can recommend immediate purchase for aggressive investors and a buy and hold strategy for all others on a positive change in demand dynamics. 5-Day Chart of USO at Seeking Alpha The United States Oil security suffered a serious setback with energy prices over the past several weeks. Most recently, the OPEC decision to keep production quotas unaltered was deflating to say the least. Energy prices still held that day thanks to the strong jobs report that lifted all ships, but the week that followed (see chart) reset a course for energy more in line with the bad news. However, with the new week Monday brought fresh data to look over. The news was very good from both China and Europe in recent days. From China : retail sales, industrial output and fixed-asset Investment all exceeded economists’ expectations. Industrial Output increased 6.2% in November, year-to-year, far exceeding the economists’ consensus view for 5.7% (by Bloomberg). Fixed-asset investment increased 10.2% through the first 11 months of 2015. Retail Sales soared 11.2%, marking the best rate of growth for all of 2015. It finally appears that China is stabilizing. From Europe, we learned Monday that eurozone industrial production increased by 0.6% in October, month-to-month, in line with expectations. It’s a level consistent with 1.9% growth year-to-year, versus 1.3% previously seen. Growth was broad-based, with capital goods growth at 1.4% and durable consumer goods growth at 1.8%. Most of the eurozone members produced growth, save for Greece. November may still present a challenge if there was a shock to the regional economy due to terrorism and concern about terrorism, but October’s data shows a regional economy that is improving long-term. Given the U.S. economy has been in growth mode, the recovery of Europe and the stabilization of China is welcome news for the demand side of the energy equation. Economic recovery in Europe would also lend to euro stabilization and as a result, dollar stabilization. If the dollar can give back some ground on such a result, then oil prices should find further fuel to stabilize and look toward better days. Obviously, the supply side of the equation remains problematic, and it has been the key factor in energy’s demise. OPEC did not allay any concerns on this front when it effectively took no action to cut production at its December meeting. However, the pickup in demand that the latest data seems to point to would help to allay concerns as U.S. production continues to come offline. Also, I’m not a pure believer in Iran’s long-term return to production, unless it strengthens its security and defense relationship with Russia. Otherwise, I wonder how far it will be allowed to progress with its nuclear program, despite recent agreement with the West. With regard to Russia, I believe it is more likely to be a catalyst for oil price rise than for decline, as it remains active militarily in the Middle East. This is made clear by its recent foray in Syria and its conflict with NATO member Turkey. I expect there is a greater chance of escalation than for calmer heads to prevail in this regard. A significant enough mistake should serve as an immediate boost to energy prices, given Russia’s importance to the market and its relationship with Iran. So, after the latest price revaluation, taking the United States Oil down to important historic lows, I see upside opportunity for buyers. Monday’s gain, however questionable after the last week’s trading, appears to illustrate stabilization. It comes on tangible footing, given the latest economic data from both China and Europe. The wildcard of Russia’s presence in the Middle East and its friction with Turkey present the possibility for swift upside reward, but I see a long-term case for purchase as well. Demand should increase as the economies of Europe and China stabilize and return to health, and that appears to be starting now. Supply remains at issue, but the issue appears well-understood and priced in enough so that any change, for instance with regard to Iran’s production, would also serve upside. Therefore, I favor long stakes in oil and the USO now.

RSX – November Review: The Share Price Driven By Geopolitical Factors

Summary RSX share price declined by 0.12% in November. The geopolitical events had a significant impact on price development of Russian shares in November. The relations between Russia and the EU have improved after the Paris terrorist attacks, the sanctions may be canceled soon. The Market Vectors Russia ETF (NYSEARCA: RSX ) experienced a rollercoaster ride in November. After gaining more than 5% in the first days of November, it started to decline steeply, as the falling commodity prices weighed on Russian companies. After the Paris terrorist attacks on November 13, the Russian share market started to grow, as the relations between Russia and the western countries started to warm up and the idea of a soon end to the anti-Russian sanctions came back to life. RSX was up by 5% month-to-date, when Turkey shot down Russian plane in Syria, on November 24. Turkey is a NATO member and the fears of the consequences of this attack pushed RSX back down and it finished the month almost flat. Sberbank ( OTCPK:SBRCY ) is still the biggest holding of RSX. It represents more than 9% of the portfolio. The weight of Lukoil ( OTCPK:LUKOY ) is more than 8% and weights of Gazprom ( OTCPK:OGZPY ) and Magnit are over 7%. Weights of all of the 4 biggest holdings increased compared to October. Shares of Severstal don’t belong among the top 15 RSX holdings anymore. The steelmaker was replaced by Mail.Ru Group ( OTC:MLRUY ). The 15 biggest holdings represent 77.97% of RSX portfolio. Source: own processing, using data of Vaneck.com Out of the 15 biggest RSX holdings, the biggest gains were recorded by shares of Mail.Ru Group in November. Shares of the e-mail service and interactive entertainment provider jumped by almost 18%. Investors appreciated the acquisition of the map applications maker Maps.Me. Shares of Sberbank , the biggest Russian bank, climbed by more than 9%. The share price was boosted by the information that in October, Sberbank recorded the best monthly financial results since September 2014. The biggest losses were recorded by London listed shares of Surgutneftegas ( OTCPK:SGTPY ) and by the major nickel and palladium producer Norilsk Nickel ( OTCPK:NILSY ). Both of the companies lost almost 9% of value. Source: own processing, using data of Bloomberg The correlation between RSX and oil prices (represented by the United States Oil ETF (NYSEARCA: USO )) changed rapidly in the second half of November, as the political factors started to set the direction of the Russian share prices development. The correlation between RSX and USO touched the -0.6 level at one point, which is a relatively high level of negative correlation. On the other hand the correlation between RSX and S&P 500 remained relatively high for the better part of November. Source: on processing, using data of Yahoo Finance Regarding the volatility, November was one of the calmest months of 2015. The 10-day moving coefficient of variation was moving in the 1.75% – 3.75% level. In the end of the month, it declined back to the 2% level. Source: on processing, using data of Yahoo Finance Some of the more interesting news: Lukoil announced its Q3 2015 financial results. It recorded earnings of $614 million (62% lower compared to Q3 2014), income from operating activities of $1.272 billion (decline by 56% y-o-y) and revenues of $23.418 billion (decline by 40% y-o-y). Sberbank reported that it recorded net income of RUB33.9 billion in October ($510 million) which is its best monthly result since September 2014. Net profit for the first 10 months of 2015 totaled RUB178.3 billion ($2.68 billion). Mail.Ru Group acquired Maps.Me, maker of map applications. Mail.Ru intends to integrate Maps.Me into its my.com platform. The my.com platform was launched in order to expand on the non-Russian markets. Maps.Me should help my.com to expand especially to the USA and to Germany. Yandex (NASDAQ: YNDX ) launched a weather forecasting service based on machine learning technology (Meteum). Meteum should calculate a new weather forecast every time a user consults the service. It should be able to provide weather forecasts on a hyper-local basis (according to the company, forecasts for particular city parts or even for particular buildings will be available). Meteum should be able to keep on improving the accuracy of its predictions as it will compare its forecasts with the actual weather conditions. Polymetal ( OTC:POYYF ) announced very good results of the Kyzyl Gold Project feasibility study. The mine should produce 325,000 toz gold per year over the 10 years of open pit mine operations. After the open pit operations, 12 years of underground mining will follow (270,000 toz gold per year. The average AISC is expected at $630/toz and the initial capex is estimated at $328 million. The after-tax IRR is 27% and NPV (10%) is $538 million at gold price of $1,200/toz. Russian GDP declined by 4.1% y-o-y in Q3 2015. It is an improvement compared to the Q2 decline by 4.6% y-o-y. The 2015 inflation rate will probably increase to 12.8% which is slightly more than the previous estimate of 12.2%. Conclusion After the Paris terrorist attacks, the relations between the EU and Russia started to improve quickly, as some of the European leaders finally realized that Russia is the most important ally in the war with ISIS. The Russian share market reacted by a swift growth, as the likelihood of a soon end to the anti-Russian sanctions has increased. Although the Turkish attack on the Russian plane pushed RSX lower, the Russian reaction on the incident has been relatively mild and the fears of a wider Russia-Turkey or even Russia-NATO conflict turned out to be significantly overblown. Moreover the oil price seems to have a significant support at the $40 level. If it rebounds and starts to move closer to $50, RSX may record some decent gains in December. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Don’t Ride The Roller Coaster, Bet On It

With global markets (esp. EM) stumbling, the upcoming FOMC meeting, political instability worldwide, and weak US domestic data, it may be time to bet on an increase in volatility. September through December are going to be some of the most volatile months in the year. Several options for investors: ETFs/ETNs that track volatility, such as TVIX, VXX, UVXY, derivative strategies, or going bearish/long-term on stocks. What a summer it’s been and September is only half-way over. Just overnight (as of Sept. 14th, 2015), Asian markets dipped again on poor economic data, with the mainland Shanghai Composite (SHCOMP) ending on -2.67% (at one point, nearly falling under 3k) and the Nikkei Index falling under 18k at -1.63%. Unfortunately, for international investors, this is not news . With the stock market crash that started in June and the subsequent desperate attempts by the Chinese authorities to prevent the crisis from getting any worse, everyone can at least agree on one thing: the ‘Asian century’ is faltering (for the brief three decades that it lasted) and the annual 8% GDP growth figures are a thing of the past. And considering China’s is a pseudo-market system run by an aging regime that grew up out of the throes of Mao’s Great Leap Forward and Cultural Revolution, recent events should come as a surprise to no one. From the real estate sector to the financials sector, China has been one giant bubble bound to burst. Below is the SHCOMP 1yr with Jean-Paul Rodrigue’s ‘phases of a bubble’ superimposed. (Source: Bloomberg Business) As to be expected, capital investment has been pouring out of China as illustrated below. And China’s isn’t the only market international investors need to be worried about. All of the emerging markets, especially the BRICS, are going to be very volatile. Between Brazil’s immense debt and failing presidency or Russia’s falling ruble and dependence on oil , emerging markets are going to be in quite a lot of pain in the coming months, especially since central banks are running out of options as most have already exhausted their QE (quantitative easing) measures. (Source: JPMorgan) (Source: Reuters & NASDAQ) Speaking of central banks, on September 16th-17th, the Feds will finally meet, in what was probably one of the anticipated and over-analyzed FOMC meetings in recent times, to discuss the results of their votes on a Fed rate hike. As grossly aggrandized as the possibility of a rate hike has been, it is an important element to consider, especially since EM countries gobbled up so much dollar-denominated debt back when it was cheap. Not only that, but the private-sector credit to GDP gaps in EM countries is growing fast; China’s alone is off 25.4% from its long-term trend, the highest of any major country, with Turkey and Brazil following close behind with 16.6% and 15.7%, respectively, far above the recommended ratio of less than 10%. A rate hike, which the CME Group predicts is a 75% probability for the upcoming meeting, is going to add to the enormous strain that the financial sectors of these countries will face. All of these factors piling up seem to spell doom-and-gloom for the rest of the world, but what of the U.S.? Well, to the excitement of the Fed, employment data, which was a serious concern during the 2008 financial crisis, is looking more and more positive month after month. As of August, the official unemployment rate fell to 5.1%, with some officials celebrating the return to ‘full unemployment’ levels . However, despite all the jubilation, productivity and actual GDP growth is still lagging way behind. Macroeconomic expert Chris Varvares estimates that “capital-equipment, software and buildings-per worker has grown just 0.3% a year so far this decade, by far the worst in at least 40 years.” Thus, real wages are also stagnant, as the yearly change rate is still hovering around 0-2% . With less cash to spend and winter months approaching, American consumers are not going to be rushing to get in line for Wal-Mart’s Black Friday sales, they’re going to be running to the banks to deposit and save. Great news for the banks, but bad news for consumption which drives the American economy. So, with the general consensus being that emerging markets will suffer greatly in the short-term at least, and that American consumer confidence and demand will slow as well, what does that mean for the average investor? Volatility. To determine volatility is to simply measure the size of changes in a security’s value over time, e.g. a higher volatility means larger fluctuations in a stock’s price in a short timespan. Volatility means different things to different people, that is, central bankers, for example, work to keep volatility at a minimum as part of their Dual Mandate to keep the prices of goods and services stable. However, speculators willing to take the risks involved can profit greatly from volatility…in the same way someone betting at the horse races can profit greatly betting on a lame horse, if you have the magic of foresight and/or are very lucky. But in all seriousness, certain investors can benefit in taking a smart position in indices which track volatility. (Source: Bank of International Settlements) (Source: Yahoo Finance) One such index tracker is the VelocityShares Daily 2x VIX Short-Term ETN (NASDAQ: TVIX ) which tracks two times the daily performance of the S&P’s 500 VIX Short-Term Futures Index. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA: VXX ) and the ProShares Ultra VIX Short-Term Futures ETF (NYSEARCA: UVXY ) are more bearish options with lesser expense ratios (0.89% and 0.95% v.s. TVIX’s 1.65%) and there are even more options, such as inverse VIX ETFs (which are essentially the opposite, i.e. betting on stability). Now , before you get your contrarian pitchforks out, there are some points that I will concede. I think Dan Moskowitz of Investopedia puts it best – “the only way to win playing TVIX is by having impeccable timing.” Going long TVIX is a sure-fire way to lose money as common sense dictates high volatility is not a permanent condition. Even further, on the contrarian side of things, TVIX has depreciated 99.97% since its 2010 debut, 77.92% over the past year! Clearly, it is a very risky game to play, yes (but so is the lottery and that’s a multi-billion dollar industry). However , the timing is perfect now. With all the recent domestic political turmoil across the world, emerging markets crashing, and the Fed signaling a tightening of monetary policy, I cannot see, save for a miracle from the Feds, the markets getting by unscathed without a few twists and turns. And speculators would seem to agree with this. According to the CTFC (Commodity Futures Trading Commission), as of Sept. 1st, speculators achieved an all-time record of net long VIX futures contracts, with 32,239 contracts added, double the previous record set in early February and the largest ever bet on a rise in the VIX. This is very significant; even the contrarians who would immediately disregard it and go bullish on stocks in spite have to admit that. (Source: J. Lyons Fund Management Inc.) For the average investor out there (such as myself) staying long on stocks and bonds, sticking to ETFs, or cashing out may be some of the best options available to avoid getting strung along for the ride as the markets reel and spiral. But for you aspiring speculators, hedge fund managers, or simple millionaires, this might be a very profitable time to be betting on increased volatility. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.