You Can Still Enter Oil's Safe Haven

 | Jun 24, 2013 | 4:22 PM EDT
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The disaster that has occurred in the stock market since the Federal Open Market Committee meeting has been outdone only by the disaster that has occurred in the bond market, where the 10-year Treasury note is now hovering close to 2.6% -- a massive move for a "slow" asset.

But even those losses are somehow dwarfed by the losses in emerging-market indices as China's purchasing managers' index struggles and the Chinese government looks headed toward a credit liquidity problem of perhaps greater difficulty that the one we shouldered in 2008.

Gold? Don't look there -- the yellow metal is under $1,300 an ounce for the first time in three years and looks miserable on the charts. This is a trade that has finally rolled over after almost 20 years of performance. If you ever wanted to buy gold but missed the opportunity, my trader's sense says that you'll get multiple chances in the next several months -- if you're willing to take the risk. Copper is hitting $3, a low not seen in years, and the grains are getting pummeled.

Look, there's no need to lie -- it's bad out there, and you have few places where you can put money, even as a holding zone, for the next several months as the markets find new levels that deal with the headwinds of the Fed tightening quantitative easing.  

But I still am going to suggest oil and oil stocks. They were incredibly resilient in the weeks leading up to the FOMC meeting, and they have been rock-steady through these latest market gyrations -- at least relatively speaking.

And that may be an institutional switch. Hedge funds and money managers are trying to find a new asset diversifier outside of gold that will work, now that everything seems to be in free fall. Long hedge-fund positions into oil were reported today to be at three-year highs in Brent crude, and today's action shows the relative strength of oil, compared with just about everything else: The Dow closed down 139 points after a rocky day, but oil was up $1.40.

Remember the trader's motto: Never sell strength.

And I'm going to again suggest that oil stocks will be the best diversifier for those of you who cannot bear to buy oil futures directly and are wise enough to stay away from the futures-based ETFs such as the U.S. Oil Find (USO). The bond-like stocks that deliver the steady dividends, such as Exxon Mobil (XOM) and Chevron (CVX) will perform well, but the less dividend-oriented, "cyclical" oil stocks will do even better; I'm talking about Anadarko (APC), Apache (APA), Noble Energy (NBL) and EOG Resources (EOG).

These are the ones that initially got hit the strongest when the markets collapsed, but they are the most likely to fare the best as stock floats find new levels of value in a less "Fed-oriented" world.  

They are the stocks that will be able to monetize what will be a very sticky and very high price of global crude oil. They are the "consumer staples" and defensive names of the energy world that haven't rallied to incredible heights during a market that's being scoured for yield, and they're the names that will perform far better during this period of market readjustment.

And I believe this will be a long period of readjustment, easily taking up the next few months.

Check out your portfolio and don't be afraid to readjust, even now, to what's going to be a rocky road for the rest of the summer at least.

And adjust it toward oil stocks -- the strongest asset that's trading out there right now.

Oil is the new gold.

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