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September 23, 2008


Textbook Short Squeeze

Oil Posts Biggest Gain as Traders Caught in End-Month Squeeze

“Crude oil climbed more than $25 a barrel, the biggest gain ever, as traders scrambled to unwind positions on the October contract’s last day of trading.”

This is one short squeeze not (directly) instigated by the Feds. That’s a 30-min. chart below: impressive, no? There are a lot of bald guys on the NYMEX floor… some of them just got a little balder.

Meanwhile, in the land of no shorting (”artificial strength”): U.S. Stocks Tumble on Concern Bailout Won’t Stop Recession

“The Standard & Poor’s 500 Index lost 3.8 percent, erasing almost half of its rally over the previous two days. Sovereign Bancorp Inc., Marshall & Ilsley Corp. and Washington Mutual Inc. sank more than 21 percent, sending the S&P 500 Banks Index to a record plunge … All 10 industry groups in the S&P 500 lost at least 1 percent … Homebuilders in S&P indexes fell 12 percent, their biggest drop on record.”

This entry was posted on Tuesday, September 23rd, 2008 at 10:14 am (utc+8) and is filed under Energies.

6 Responses to “Textbook Short Squeeze”

  1. chad said:
    September 23rd, 2008 at 11:43 am

    Squeeze? That was a good ole fashioned corner….pure and simple - at least the closest I’ve ever seen anyway. Although, I think Hurricane Ike had more to do with this than merely “too many shorts”. Lots of refineries needed to take delivery.

  2. Anthony said:
    September 23rd, 2008 at 12:11 pm

    I think it went more like this:

    The thought of the bailout crushed the dollar, which fed the big jump in oil.

  3. C. Maoxian said:
    September 23rd, 2008 at 12:53 pm

    @chad: What’s the difference between a corner and squeeze?

    @Anthony: The dollar fell a little bit, front-month crude jumped 23%. :-)

  4. Anthony said:
    September 24th, 2008 at 4:44 am

    The dollar was down 2.6% at one point–the steepest decline vs. the euro since 2001.
    http://www.cnbc.com//id/26841323

    The dollar rallied and oil came back down at the end of the day. At least, that’s what I saw. Your charts probably reflect a truer reality.

  5. atomicjones said:
    September 26th, 2008 at 8:36 am

    That was the expiration of the Oct crude contract. Looks like someone got a little caught out and squeezed due to the lack of liquidity on last day. Note that the Nov contract never crossed $110 that day and acted rather normal (as normal as crude acts these days).

  6. C. Maoxian said:
    September 26th, 2008 at 2:15 pm

    @atomic: Yes, like getting your balls a little caught in a vise.

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