We use Brent when we price oil. We use West Texas Intermediate when we value oil-service stocks. That's the only possible takeaway when we can sink to levels on the Oil Services HOLDRs (OIH) that are back to where we were when Brent was at $105, even though it's hanging around $110. That's because West Texas is weak, and the traders all follow the futures that are based on West Texas.
That's the ETF talking. The OIH is in lockstep with West Texas and has been forever. Oil goes down a buck, these go down more. They are owned by the worst possible holders and can be knocked down with a feather. They have virtually nothing to do with the fundamentals of the industry and everything to do with the silly way stocks now trade.
I like the group because of the stickiness of Brent, which is what the drilling budgets are geared to. But that means I am fact-based, and that has been the kiss of death in this market.
How can any of this be justified? Because there is no more "big money" that stands there and uses the weakness to accumulate. Big money runs for the hills the moment selling begins, and the "buying opportunity" created is quickly ignored.
It's emblematic of the worthlessness of thought that my friend Herb Greenberg talks about. Short-term, of course, because longer-term thought still wills out. But the velocity and ferociousness of the moves makes the long-term almost entirely irrelevant.
Almost no one can stand the pain.