Rally Nobody Believes In Marches On

Just about every trader whose comment I read and hear wants to short the market or is already short. Then the market does what it does these days, which is to go up.

Quant/algo trading notwithstanding, today's intraday charts of all the major indices - Dow, S&P500, Nasdaq - registered a vertical spike all at the same time, at 2:27 PM EST. S&P Futures spiked at the same time. So far, there is no news that could have triggered it.

Certain patterns does not exist in nature, and this sure looks unnatural. You could possibly argue that the 30 minutes or so before the spike, the indices were sitting flat, getting ready for a pop.

Industrials and utilities supposed to pull the indices higher today. One of my watch list stocks, NOV, had a large volume up-day, ending the day above the overhead resistance of $40-41. I put in a partial order, which didn't fill. Might as well see if it can hold above today's close before I commit.

Deep-Water Oil Rig Companies to Replace My DXO?

Deutsche Bank is closing out DXO, double-long oil ETN, thanks to the government's regulatory crackdown that is more likely to come sooner than later (margin requirement change, particularly on commodities trading). I had no intention of selling my DXO, and was planning to hold long-term as I see a long inflationary period (even if the economy is in doldrums) ahead.

But as of September 9 (some say it's September 12), I will have no choice but sell my shares back to Deutsche Bank (I think this bank is way extended in commodities markets - soft (ag), oil, and precious metals). Other leveraged long oil ETFs may have a similar risk of being shut down. The very fact that DXO is being shut down but not DTO (double-short oil ETN, also from Deutsche Bank) indicates to me (I could be very wrong, but) that the oil price is going to go up very soon. In order for DBank to create a synthetic double-long position (DXO) someone has to take the other side, and that someone is less and less willing to take that position, either because the oil price will go up soon and he will get royally squeezed, or the new margin requirement is just too much, or both.

So, I am forced to look for alternative plays without using leveraged ETF/ETNs if I think oil is still going up. For that matter, without using any ETF to be extremely safe. (Look what happened to UNG.)

I've started looking for oil-related stocks that are still forming a base. The first batch of such companies are oil rig companies:

• Transocean (RIG)
• National Oilwell Varco (NOV)
• Pride International (PDE)
• Oceaneering International (OII)
• McDermott International (MDR)

RIG and PDE provides off-shore contract drilling and OII and MDR are engineering companies who coordinate off-shore oil rig operations. NOV manufactures actual hardware.

BP's newly discovered under-water oil field in Gulf of Mexico, the well was vertically dug 10,000 meters under 1,400 meters of water. It was a job by Transocean, and it is probably the deepest well ever dug in the world.

Anyway, here are the charts. I like RIG, NOV, and PDE, then OII and MDR.