Tuesday, July 1, 2008

Rydex energy sector assets

Currently the % of Rydex energy sector assets as compared to all sectors is the highest its been in 4 years. Like I've said everyone is piling into the energy sector in the belief that this sector is immune from the bear. These levels in the past have triggered corrections in the energy sector generally at least back to the 200 DMA.

One of the contrary indicators I use is when Cramer becomes irrationally bullish on a sector. When that happens it's usually getting close to a top. Now I know Cramer is a very sharp cookie. So I'm doubtful that he's really so stupid as to keep missing these tops. BTW he was over the top bullish on housing in 05. He was also crazy for gold in Mar. Now he's constantly singing the praises of the energy sector. As I said I don't think he's stupid. I also don't think he's controlled by his emotions. You don't become a successful trader if you can't keep your emotions in check.

So I have to come to the conclusion that Cramer touts the hot sector because that's where the viewers of his show are invested. If everyone is buying energy then they don't want to hear that oil is in the largest parabolic rise of any commodity during this bull market. They don't want to hear that during a global recession energy demand is going to drop and drop drastically. They don't want to hear that the refiners have been telling us for a year now that energy demand is dropping. No that would not be good for ad sales now would it.

BTW guess what no one is touting right now. That's right lowly gold. I commented the other night that not one of the Fast Money traders wanted to buy gold or mining stocks. That was right before the XAU jumped 14% in 5 days.