SURPRISE TRADES

There are very few trades that have a solid trend that we can not trace back to some area of accumulation. The equity or issue is accumulated quietly-stage 1, then it breaks out on solid volume attracting attention and capital inflows-stage 2 mark-up, somewhere in stage 2 the issue is distributed into demand, remember they accumulated a large position, they'll feed t out a little at a time as to not effect the supply/demand equation which allows smart money to distribute into higher prices. Stage 3 is a top, at this point smart money is largely out of the position and even going short, stage 4 is decline and then it starts all over again. This is why I say the market is not random, it's a game-board that has been set. However, once in awhile we get an event that smart money couldn't know about, they couldn't discount and the trade becomes, well-something else.

Oil looks like one of those trades. Take a look at XOIL and 3C

3C is not properly scaled as I had to fit a lot into this, but as you see, during the sideways consolidation through late 2009 until about August 2010, 3C makes higher lows at support near the $67 area, this is accumulation. By October XOIL has broken out and distribution start in November/December. Oil recently starts to round over as the divergence is now quite negative. Oil has a huge up day on Friday due largely to events in Egypt and instability in the Mideast. Now, where does oil go? They can't let it head too far north without establishing a position in it, otherwise it's a wasted move. We'll be keeping a close eye on this trade. I figure either way, they'll have to work quick.