Jan

The New York Times reports that oil’s fall continues to less than fifty dollars a barrel. Panic seems to be affecting markets.

Oil prices tumbled below $50 a barrel on Monday, spooking global financial markets and signaling that the remarkable 50 percent price drop since June was continuing this year and even quickening.

The new drop in American and global benchmarks of more than 4 percent was accompanied by a series of reports of increased Middle Eastern oil exports; continuing increases in American production despite planned exploration cutbacks by many oil companies; and renewed worries about the declining economic fortunes of Europe.

Uncertainty when extremes beget panic is common and profiting from market panic is the business of an astute trader. Where is oil going next? Will Europe slide back into recession? Will the Euro Zone break up with the exit of Greece over debt issues? How long will the recession last in Japan? And, how badly will an industrial decline in China affect raw material suppliers in the developing world? There are a lot of concerns in the markets and several means of profiting from market panic.

Panic in the Energy Sector

The Dow Jones Industrial Average has fallen by 500 points in the last few days. The US economy is growing at an annualized five percent but oil and gas stocks are hurting as the price of crude has fallen by more than half in the last six months. RT remarks on how the Dow Jones Industrial Average lost 300 points in a day due to the rout in oil prices.

The Dow Jones Industrial Average has lost over 300 points as the US crude oil prices briefly dipped below $50 per barrel thrashing energy stocks on Monday.

This situation requires application of both fundamental and technical analysis. There is certainly too much oil and natural gas chasing too few buyers as (outside of the USA) economies cool across the world. There is also panic, and profiting from market panic requires not only a solid knowledge of fundamentals but also an eye on technical analysis signals as fear and greed drive prices above and below what fundamentals dictate.

Buying or Selling Chinese Stocks

The Shanghai stock exchange is at a five year high and continues to go up at the start of 2015. The fundamentals here are that the Chinese real estate bubble is starting to deflate and investors are pulling money out of real estate and putting it into the stock market. The Wall Street Journal notes the rally in Chinese stocks . They also note that the Hong Kong exchange is being much more skeptical than the one in Shanghai.

Stocks in China started the year with a bang Monday, with Shanghai ending at a more than five-year high and China’s commodity sector defying a further tumble in global oil prices.

Enthusiasm toward Chinese stocks in Hong Kong continued to be more muted, as institutional investors dominating the market were more wary of signs of Chinese economic weakness. The Hang Seng Index lost 0.6%.

More and more investors are signing up for accounts in Shanghai. When there are no new investors clamoring for stocks the pyramid may start to crumble. At the point there may well be opportunity for profiting from market panic both with short selling on the way down and selective purchases as the market bottoms out.