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Rising Oil Prices Could Kill The Green Shoots (ETF: TBT, PST)

June 16th, 2009

green-shoots“As the price of oil continues to climb, the prospects for recovery in the housing sector are falling.  For a variety of factors, an increase in the price of oil is a drag on housing prices.  Since Hurricane Katrina hit in September 2005 and pushed oil costs upward, real estate has declined in the United States,” Reports Jonathan Yates with Stock Traders Daily.

Jonathan Yates Continues to report that “When the price of oil is high, the dollar is weak.  Imported oil is about half the US trade deficit.  To pay for oil as it increases, more dollars are sent abroad.  By the basic law of supply and demand, this weakens the value of the dollar.  When the dollar is weak, interest rates must increase to attract foreign capital into Treasury bonds to finance the US budget deficit.  From this, mortgage rates rise due to being fixed to the cost of Treasuries, making housing more expensive.   Since early in the year, oil prices have more than doubled with the yields on ten year Treasuries increasing more than 70%.  ETFs such as the Ultrashort 20-year Treasuries (NYSE: TBT) and the Ultrashort 7-10 Treasury Proshares (NYSE: PST) have increased substantially, too.”

“The multiplier effect of rising oil rises is felt in the costs of building a home, which causes it to rise beyond the ability of more and more buyers to pay for it.  Construction materials such as shingles, lubricants, and asphalt for driveways and roads increase with the price of petroleum.  Transporting these and other supplies to the building site becomes more expensive, adding to the price of a house.  As a result, homebuilder stocks have fallen,” Jonathan Yates Reports.


Full Story: Here


 

We ran these two ETF’s through the market club software and found the following results from their chart analysis program:
 
PROSHS ULTSHRT US TRUST ETF (PACF:TBT)
Smart Scan Chart Analysis confirms that a short term counter trend move is underway. When this action is over look for the longer term positive trend to resume. Uptrend with money management stops.

Based on a pre-defined weighted trend formula for chart analysis, TBT scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

     
+10 Last Hour Close Above 5 Hour Moving Average
-15 New 3 Day Low on Tuesday
+20 Last Price Above 20 Day Moving Average
+25 New 3 Week High, Week Ending June 13th
+30 New 3 Month High in June
+85 Total Score
 
PROSHARES ULTSHRT LB ETF (PACF:PST)
Smart Scan Chart Analysis confirms that a short term counter trend move is underway. When this action is over look for the longer term positive trend to resume. Uptrend with money management stops.

Based on a pre-defined weighted trend formula for chart analysis, PST scored +85 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

     
+10 Last Hour Close Above 5 Hour Moving Average
-15 New 3 Day Low on Monday
+20 Last Price Above 20 Day Moving Average
+25 New 3 Week High, Week Ending June 13th
+30 New 3 Month High in June
+85 Total Score


NYSE:PST, NYSE:TBT


 

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  1. June 17th, 2009 at 22:51 | #1

    It doesn’t make any sense to me why people don’t understand that we need to reduce our energy usage. The largest energy user of a house is usually heating and cooling. If everyone installed geothermal systems we could reduce our house usage of energy by half. With the tax incentives avaiable it is even cost effective to install.

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