Energy

The energy space is very intriguing as we head into 2016.  Why?  The psyche in this trade got very interesting in December.  Let's use OPEC as an example

From February:  They were absurdly optimistic long term.  Common rhetoric since oil peaked in 2014 was 'we are close to the bottom'

From late December: Their latest outlook suggests prices will decline next year

Who knows if that sentiment leads to a major long term bottom, or just the short term trading low we've seen.  That's a major change of opinion though..

Other pieces to the puzzle are there as well:

• High yield pessimism recently reached an extreme(the focus was squarely on energy)
• What countries are investors most bearish on?  You guessed it, Brazil and Russia
• This month's climax bottoms have happened on massive volume featuring the beautiful combination of fear and forced selling.
• Massive bursts on this recent rebound.  Yes, strong moves occur in bear market rallies.  However, every important low starts as a bear market rally.

Really, what else do we need?

More Psychology: what type of rhetoric do we want to hear if this trade starts working well?

A dummie thesis you want to hear:  The Fed is raising rates, the dollar strength will continue (actually that's already priced in).

Also, sharp moves off bottoms tend to create anxiety that sounds something like 'we're already up so much, how can you buy here'

If we rally and we hear things like that, it's a good sign.

On top of that, we've got people traveling, partying and dicking around in general during the holidays who are missing all these lows.  It'll be easy for them to be slow to react and apathetic to any move.

To sum up my beliefs: the conditions are in place for an intermediate term trading low in energy and energy stocks.  

It's easy to get married to an idea or position.  You can't do that when trying to time a bottom.  Let the market tell you what it wants.  Only marry your position if it treats you well.

Trade 'em well