Alaron Energy Comment

CHICAGO - Oct 16/08 - SNS -- Following is the energy futures comment from Alaron Trading Corp.

Its Hip to be short:   I used to be a Perma-bull, I used to buy around, but the market couldn't take the punishment, and it had to settle down. Now I'm playing it down straight, and yes I cut my hair. You might think I'm crazy, but I don't even care. Because I can tell what's going on

its hip to be short.

I like the feds business suits, I watch them on TV. They say they are working on it every day but the market still gets beat. They tell me that it's good for me, but I don't even care.  I know it's crazy, I think we should abort. But there is no denying that, its hip to be short.

It's not too hard to figure out, you see it every day, and those that were the farthest out have gone the other way, you see them on the freeway, it don't look like a lot of fun. But don't you try to fight it; "An idea who's time has come." Don't tell me that I'm crazy. Don't tell me I'm nowhere. Take it from me, it's hip to be short.

Oh boy is Bernanke bleak and some trader's kind of wish he would just shut up. Stocks tank after Big Ben talks and brings oil and product right down with it. No time to be hip, it's time to get squared. Oil bulls are getting slapped back  to reality realizing that a slowing global economy is  no way going to support oil anywhere  near  $100 a barrel. And if they were hoping that some soothing words from Fed Chairman Bernanke would turn things around they have another think coming. Oil has been shocked out of its bullish expectations by the cold hard reality of the economic problems facing us. At this time obviously the truth is it is just hip to be short.

Maybe Fed Chairman wants to break the market. Maybe he wants us to not have high expectations. Maybe he wants a crash in stocks but a crash that still has a modicum of confidence. The credit crisis is squeezing credit and testing confidence which is vital for a robust energy market. Growing fears over credit and counterparty risk has killed many oil deals and demand. Not only are the users of oil finding a hard time getting credit, even if they can get credit, the fears by sellers confidence may slow the deals as well. Lack of trust and confidence will lead to more contraction of demand and many users may have to close up shop and quit doing business.

Of course more and more counterparties are now looking to the CME group for help not only doing more exchange transactions but begging them to create new products to suit their individual needs. The exchange model for clearing transactions may be the savior of the energy market business as the exchange will act as the buyer to every seller and the seller to every buyer and allow confidence in your counterparty in these trying economic times. And at the end of the day you actually know what something is worth! Gee, what a concept!

The big hope  for oil bulls is China demand. There were reports earlier this week that oil imports into China rebounded 11% last month. Yet it seems reports from BHP Billiton and Rio Tinto makers of steel, metals, coal etc., is that the demand from China is slowing. Japanese refiners have been disappointed with China demand as well. OPEC is cutting their demand forecast  for the second month in a row.

Still as bad as the market looks I again have to warn you that there may be sharp rebounds. I have had the $67 a barrel area as a major longer term target even when oil was going crazy bullish and the low 70 dollar area could lead to a surge of profit taking. Bullish day trade cowboys and shorter term traders should try to catch that proverbial falling knife first in the low 70 area and the second wave and less risky 67 area. Some of the put options that I have on we are taking some profits and rolling around. If you have called for option ideas and you put some on check in for an update.    

Based on all the calls and emails I am getting I can see there are many that are extremely stressed. I know these are trying times. Many of you have called in bad positions and I have helped many of you get out of them. The most common question I get by people on the wrong side of the market basically comes down to whether I should just get out or should I ride it out. The truth is that there is not one answer for everyone. Some should have been out long ago and others might just need to adjust their position. All circumstances are different. If you are feeling lost or do not know what to do, you can call or email me whether you are a client or not and I will do my best to help you out. Just call me on my 800-935-6487 number or email me at pflynn@alaron.com. Also if you sent me an Email and I failed to respond please resend it. With the high volume of Emails I get and some network problems it might have gotten lost. The other way to get a handle on these trying markets is to watch me on  the Fox Business Network every day. Also check out the Alaron Energies! And you can open your account with me by calling me at 800-935-6487.        

We're short November crude from apprx 10800 -  lower stop to 8300!!!!

Sell November heating oil at 23000 -  stop 25000.

Sell Dec RBOB at 19200 - stop 20500.

We're long  November  natural gas from  apprx 670 -  stop 640!

Have a GREAT day!

Phil Flynn

Alaron Research Team

800.563.9510

pflynn@alaron.com

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