The “next oil spike” started last year!

The folks who expound on crude oil pricing are once again tied up in the usual knots. As I sit to write to you today, these guys don’t know whether to buy on the breakthrough to $83/bbl– or sell on the breakdown to $78 and change.

Judging both from the conflicting newswire headlines and the action on the trading floor in downtown Manhattan, I suspect that some of these clowns are buying, selling, and going stark raving mad – all at the same time.

With all this noise in the background, it’s so easy to miss the more important points in the oil equation. The fact that crude futures are up 11.61% since early December is salient primarily because of how it positions us in oil’s long cycle, and how that larger cycle interacts with the economy and the stock market.

When you take a big step back and view that larger cycle, you can see that oil has indeed crossed a critical threshold – but it was way back at $75, and it crossed it last June! All the sturm und drang of the past few weeks – “will we beat $80 again tomorrow, are the plenum oversupplied for the next week, and what about those ships sailing around the gulf?” – completely misses the point.

As in 2007, we are swamped with excess dollars. When pressed, the bankers and politicians readily admit this, noting that the moment they “see” inflation, they will act to sop up this flood.

Whether they choose to see it or not, the most important price – energy – is already rising. And just like in 2007, there isn’t a man out there with the, er, “spine” to stand up and take away Wall Street’s free lunch.

Last week, I showed you how my master chart of the S&P 100 called for the current boom to continue for the next 12 months. In that article, I spoke of both the stimulant effect and inherent limit that excess dollars would impose on the market.

That inherent limit is, of course, inflation. Inflation may be the disease, but crude oil is its vector, the agent that allows inflation to spread into every little nook and cranny of the economy and slowly rob folks blind.

We talk so much about 2008’s “Real Estate Crisis,” and “Banking Crisis,” that we readily forget that it was the immense transfer of cash from the open economy to energy companies – the quadrupling of gasoline at the pump and doubling of heating and electric bills – that pushed an entire cadre of mortgage holders underwater and into default.

That massive transfer is already underway again. Note that the S&P Energy Select SPDR (XLE), the ETF that bundles up most all the relevant oil patch players, has already gained some 63% since its bottom last March. These stocks will, in all probability, gain another 40% to 60% as they work their way to the crest of the next cycle.

And even that figure is deceptive. As billions of dollars are transferred to these companies, some will most certainly rise substantially faster than others.

This group represents the poison that will eventually tip the market into the next troughing cycle. But within this group are a few unique opportunities to double your money several times over. I will explore how to differentiate between the companies that are simple money sinks, and the ones that represent genuine opportunity, next week.

Other Related Topics: Adam Lass , Crude Oil , Energy Products , Stock Market Analysis , Wall Street , WaveStrength Options Weekly

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