Short-Term Stock and Oil Prices

The Upcoming Short-Term Rally

First, a disclaimer: use these forward-looking statements at your own risk.

The date today is September 12, 2004. I predict that in the last week of October:

1. The price of crude oil will fall below $38 a barrel. The price today is $42.80 and it just fell from almost $45
2. The Dow Jones Industrial Average will exceed 10,800. The price today is 10,313.

The U.S. Federal Elections are Nov.2, and I predict that:

The Republicans may try to boost the oil supply with Saudi oil.
The drop in oil prices would have Wall Street predicting higher earnings in the manufacturing sector, whose expenses are dependent on oil prices.
With a perceived stronger economy, people may bet on a republican win, which I believe has historically been applauded on Wall Street. Maybe this has already been factored into the price, given the current sizeable lead that they have.

I was predicting earlier that by early October we'd see these levels for crude and the Dow, but it might be later than that. The republicans might want the elections to happen while things are starting to look good, and before the Federal Reserve can change the interest rates. There you go. My predictions.

November 4th, 2004: Two days after the election. How did my predictions fare? Pretty well. As an absolute number, I was off because I hadn't foresee the oil price crisis of October. But as a relative percentage gain, it was almost right on. In the last week before elections, as predicted, there was a 3% rally on the Dow, which is close to what I predicted (I chose 10,800 because it was 4% above the value at the time.). And one of the big factors pushing the numbers was oil price, which dropped about 10% in the week before elections (I chose $38 because it was a 15% drop from $45). In relative terms, it was all quite predictable. Oil prices and the dow were controlled by the republicans to give the impression of a healthy economy, but timed exactly one week before elections - as predicted. But the Osama Bin Laden tape - that was pure genius! Pure pure genius.