Oil Could Make The Stock Market Crash

Oil Could Make The Stock Market Crash

With oil down big again today, furthering the bear market it entered and more than 10% correction, it made me think the potential effect oil could have on the stock market. Although it has been widely talked about, the big reason for why oil has been down hasnโ€™t really hit the markets so I think there is a potential for oil news to move the market. If oil goes down from here and rapidly, assuming no other news like china trade war or fed neutral rate, changes then the market could see a negative effect. Puts on oil are expensive so be careful and look for deals on a bounce or secondary plays to play through oil that will move.

Get your application to pledge here: http://www.PledgeTheFraternity.com

FREE STOCK TRADING COURSE & CHATROOM!: https://www.ttfrealestate.com/p/free-stock-trading-bootcamp

SUBSCRIBE & LIKE for more videos COMMENT below if you have any questions and I will respond or make a video!

If you haven’t done so follow me on social media! I am most active on Instagram
Instagram: http://www.instagram.com/thetradingfraternity
Facebook: http://www.facebook.com/tradingfraternity
Twitter: http://www.twitter.com/joshanswers

If you want to get your real estate license and/or learn how to flip/wholesale you can do so below by joining our state approved course that will qualify you for the real estate test in your state and provide you with the exact training we give to everyone who works with us! Create another source of passive income to fund your trading account!
http://www.TTFrealestate.com

DISCLAIMER: These videos are for educational purposes only. Nothing in this video should be construed as financial advice or a recommendation to buy or sell any sort of security or investment. Consult with a professional financial advisor before making any financial decisions. Investing in general and options trading especially is risky and has the potential for one to lose most or all of their initial investment
Oil Could Make The Stock Market Crash

15 thoughts on “Oil Could Make The Stock Market Crash

  1. Great Video there is alot of noise about Interest Rates and Tarrifs but not much about oil.As you say it could be the blow to the stock market.I literally started researching this and you were the first video to pop up.

  2. I have attached the introduction and conclusion to a paper I wrote last year about the impact of the last big OPEC announcements on returns to firms in different oil and gas sectors. OPEC meeting in Vienna coming up in December. If you want the full report, post your email and I will share it with the figures and methodology used in the statistical analysis. Enjoy and let me know what you think.

    "
    Effect of OPEC Announcement on Returns to Firms in Different Sectors of Oil and Gas

    Introduction

    On November 30th, 2016, OPEC member countries agreed on a deal to cut production by 1.2MMBOPD, almost 2% of global production, in an effort to stabilize the global oil market. The resulting agreement led to a surge in oil price to above $50/BBL. The goal of this paper is to analyze the effect of the OPEC announcement on the price of WTI as well as the impact of individual firms involved in the production of oil.

    Hypotheses

    This study will evaluate the returns of firms in different sectors within the oil and gas industry:

    1) Major oil producers- international, vertically-integrated companies with both upstream and downstream operations

    2) Shale producers- American shale producers with only upstream operations

    3) Service companies- international companies which provide services to oil and gas upstream producers

    The preliminary hypothesis is that the OPEC meeting will have an effect on returns to firms involved in the production of oil and gas, with major producers having the lowest impact due to diversity of operations and shale producers having the highest impact due to their sole focus on upstream operations. If the OPEC meeting results do have an impact on firms within the industry, then we will be able to conclude that OPEC has power to influence markets.

    Conclusion

    We will compare the results of the event study to the preliminary hypothesis. The preliminary hypothesis is that the OPEC meeting will have an effect on returns to firms involved in the production of oil and gas, with major producers having the lowest impact due to diversity of operations and shale producers having the highest impact due to their sole focus on upstream operations. If the OPEC meeting results do have an impact on firms within the industry, then we will be able to conclude that OPEC has power to influence markets.

    The results of the event study confirm the hypothesis that the results of the OPEC meeting did indeed have an effect on firms involved in the oil and gas industry. Major producers had the lowest impact from the news, with returns around the event within the normal range for returns, however shale producers and service companies did have high abnormal returns around the event. This was due to optimism towards a higher price environment and a balance in supply and demand globally. The returns for shale producers are directly proportional to production volume multiplied by the oil price: a higher anticipated future oil price leads to positive sentiment for higher future returns, which can be seen factored into the increased stock values for the firms. For service company, profitability is directly proportional to the rig count in the US, which is also a factor of oil price: shale producers drill more in high price environments and cut drilling costs in low cost environments. The high abnormal returns reflect the anticipation of a rise in drilling activity from US shale firms.

    Next, we will answer the two big questions from our event study:

    1. Should we expect new information to be priced in immediately?

    2. Should we expect new information to be priced in rationally?

    We can see that for question 1, new information was priced in immediately, as seen by the high abnormal response immediately around the release of the announcement. As for the rationality of the pricing of new information, it can be concluded that the information was priced in to reflect a response to the immediate rise in oil price as an indicator for future profitability.

    The results of the event study confirm that the OPEC announcement on November 30th did have an impact on different sectors of the oil and gas industry, with the most significant sectors including shale producers and service companies and the least significant being majors. The impact of the news could be seen immediately in the high abnormal returns of shale producers and service companies, with no significant impact in majors. In the post-event window, we can see the news positively impact the returns to all industry sectors, with about a 10% increase for all sectors 20 days after the news. This means that OPEC indeed does still have the ability to significantly affect oil markets.

    "

  3. i have been toying with the idea of dumping my tech stocks which are loosing money and purchaing ERX. what are your thoughts on getting into ERX at this point in time?

  4. Thx for the video man ๐Ÿค™
    Wanted to ask what platform do you suggest for an 18 year old South African

    And also is it possible to join the cult being from South Africa

  5. Love it Josh!! Appreciate the content man!! Always dropping knowledge. ๐Ÿ™Œ๐Ÿพ๐Ÿ”ฅ if youโ€™re reading this then you definitely want to join the cult!

  6. Love your videos man, keep em coming! I appreciate all the knowledge you share for free. Sending in my cult application ASAP. I love trading man and you are without a doubt a beast. Learning from you has already helped my trading drastically. I could only imagine how sick the gains would be as a cult member. LETS GET IT

  7. Watch the rig count, that'll tell more about the contraction in the oil business due to this lower prices.

  8. Can the U.S currency also have an effect on market. Since china is doing everything is can to get rid of the dollar $ ?

  9. The thigs you were talking about is called Macro economics ๐Ÿ˜‰ Good view dude, keep the great work

Comments are closed.