Forgive me, readers, for I have sinned.

In my three rules, the very first one I state – which I consider the most important – is to never lack a stop price. I had a position on OIH. I had a stop at $195. And as it, to my amazement, approached that level, I simply cancelled the stop.

That was really, really dumb. My "three rules" were crafted over many years of hard experience. I say "no exceptions" for a reason. Telling myself I'd ride out the tide and see how it goes was the kind of mistake an amateur makes.

Well, you know how this story ends. OIH kept grinding higher and higher, and once it reached $208, I couldn't take the pain anymore, so I sold my puts at a far greater loss than if I had simply let the stop do its work.

Now, at this point, there is a possibility OIH could temporarily top out and weaken. But – – again – – simply hanging onto a position and hoping for the best is idiocy. Shame on me.

OK, enough self-flagellation for the moment. The market continues to be far stronger than I'd like to see. Yeah, the Dow fell a little today, but I still think we're in "retracement-land". I am watching, for example, the $MSH. I am OK with it so long as it stays beneath that horizontal line.

One key component, of course, is Apple, which reports after the close on Wednesday. Errr, needless to say, everyone is going to be watching this like a hawk after-hours, particularly given GOOG's incredible blow-out last week.

As for oil – in spite of my debacle with OIH, I still have a lot of oil-related shorts. Chart-wise, there is a lot of interesting activity here. BHI has fully retraced to what I consider a face shorting zone.

And CVX – even on a day when oil hit yet another record – is showing weakness. I'm thinking "quadruple top" when I look at this.

My martyr complex is on full-blast right now, so I'd say the video below represents my vision of what a Slope Convention in Vegas would be like in August. A few of the dramatis personae…...

• Jesus H. Christ – Tim (who else?)
• Mary Magdalene – Jana (understudy: Avalon)
• Judas Iscariot – JakeGint
• Simon Zealotes – Peachin
• King Herod – Ned
• Caiaphas– Abby Joseph Cohen
• Pontius Pilate – Beanie

When I was in the 9th grade, one of the classes I took was called Introduction to Business. I clearly remember one day they wheeled in the TV and played a National Geographic special called "Gold!", which was a breathless documentary about gold and its import to the world. The teacher also handed around a Krugerrand he had brought into the class. As it was being passed from student to student, he told us how "gooooooood" it felt to hold. The fact I remember it after all these years speaks to the experience. This is what gold looked like at the time of this little event in my life………..

What I didn't realize at the time is that when gold mania reaches so far down that 9th graders are talking about it, the mania is probably pretty near the end. I daresay the red circle, drawn below, is roughly where this little talk took place in my class.

As you can see from the graph above, gold spent the next two decades doing absolutely nothing (there were gyrations along the way, but gold bugs spent all the 80s and 90s being disappointed).

And it isn't that gold was the only commodity in history to experience a bubble. Even something as pedestrian as sugar made the late 70s run in gold look like nothing. Just take a look at this:

…….but yet again………..

Does this mean that everything that goes up goes right back down? No. But, unlike stocks, commodities do tend to be relatively cyclic and price-bound. In other words, a stock like AAPL which goes from $5 to $200 isn't necessarily doomed to returned to $5. But something like Gold isn't going to go to $1,000 and stay there forever.

Now, just to be clear, I look at futures simply as an interested chartist. I've never traded a futures contract in my life. I'm more interested than usual in commodities these days simply because of the huge bull run in commodities that we've seen the past few years. But I think it would be instructive, especially for those that don't typically follow futures, to take a look at a few of these charts. Please keep in mind that these charts span decades.

First, here is Corn, which is near highs never seen before, and even pierced that multi-decade upper trendline.

Of course, there's crude oil, which in 1999 was approaching $10 per barrel (seems like science fiction today, doesn't it?) People used to think about triple-digit crude prices as something unfathomable, but it seems we've all become accustomed to them very quickly. But in this entire graph, there has never been a market like this for energy (the Gulf War in 1990-1991 was just a blip in the grand scheme of things).

And our old friend gold, which has exceeded the (admittedly not-adjusted-for-inflation highs) levels set nearly 30 years ago.

And, the highest flier of them all – – of all things – – wheat:

When is this all going to end? No one knows. After all, gold went up eight-fold during its last madness in the late 70s, so an eight-fold run this time would push it to $2,000 per ounce. And some very smart people – like Jim Soros – believe the "big top" in commodities is still years away. But I can't help but be skeptical of how much more these markets can run.

I'm always pleased to hear from Slope readers, but some really stand out. One gentleman wrote me a few days ago – he's an energy analyst based in Boston – and he had some interesting insights on the energy markets. His email was so good, I asked (and received) his permission to publish it here. If any of you want to contact this gentleman directly, drop me a line, and I'll pass your email on to him. Here is his post…………..

I trade energy stocks for a living after having covered the sector for 20 years on the buy and sell-side.

Oil and OIH now reside in an uncharted world. Specifically, SLB actually misses 1q08 EPS by 5% and the y/y was a paltry 10% (versus 63% y/y in 1q07, 82% in 1q06, 38% in 1q05 and 81% in 1q04); yet, the stock explodes higher yesterday propelling the move in OIH.

My fear in looking at your chart on BHI is that this stock is going back to $100.

Consider oil over the past five years. First driven by low inventories, myth now debunked; then lack of spare OPEC capacity, now debunked; then hurricane issues, debunked; then the Iranian issue, now debunked; then it was all about the dollar ? Now debunked. Dollar rallies sharply on Friday, gold goes down, but oil soars to new highs. Oil is on its own mission. The move higher sows the seed of its own destruction, but who knows where the point of pain exists.

Aside from housing, the single biggest reason to remain bearish is oil. The commodity may continue to explode higher until it crushes the economy and US, European and Japanese stock markets. WTI oil averaged $72 per barrel last year. This year could/will be $40 per barrel higher ? that?s $300 billion in higher oil costs alone to the US consumer, or almost 3x the so-called stimulus package.

The problem with shorting energy stocks is that fundamentals do favor the pure producers (not so the refiners or big oil).

I am glad we are able to make the connection as I have truly enjoyed your comments, which often exactly capture the mood of the markets.

The next several days are critical for oil and energy stocks. The May futures contract expires on Tuesday April 22. Crude needs a rest, but if it does not pull back at expiration, certain producing stocks are going to break-out to even higher highs. The reason is that the operating leverage for some of these companies is HUGE. The key is to focus on companies with high quality production assets, long reserve lives, AND low marginal tax rates. APA, CHK and OXY are three of the best examples. You have posted on APA, and the chart does look extended, but at $116 oil and $10 gas, the earnings and cash flow is there to back it up. I am not long APA at $140. I am quite long OXY and CHK. The former is perhaps the single best equity play on oil and the latter = one of the best plays on natural gas. I will explain more on these two names in a later missive.

The huge difference between energy, housing and tech ?bubbles? is that the energy companies actually have real EPS, cash flows and improvements in net asset value. The numbers at $100 + oil are staggering. For the industry, it is not about the % change in commodity price, it is about the absolute number.

I have been out of the OIH for the last year, after catching big runs in 2004 and 2005. The reason is that despite a great oil price, revenue and EPS growth RATE is slowing for the service sector, which I consider to be a key driver. I admit that I don?t understand the move in SLB on Friday, unless it was option expiration.

On the short side, the higher crude goes the worse it is for the refiners (VLO, SUN, MRO, TSO etc). Product demand in the US is negative, which has killed margins. Also, big oil is quite vulnerable at these levels. As a pair-trade to the producers, it looks worthwhile to be short XOM, with smaller shorts in BP, COP and CVX. The market does not yet know how bad refining earnings will be for the big boys until 1q08 EPS reports next week. Also, if crude going higher cracks the stock market, I project it will take down the big index names like XOM and CVX. The risk for me is that the reverse is also true. Lastly, if oil goes much higher, government is going to be forced to get involved. The window for me is that the so-called market pundits have not started picking up on how devastating the financial flows are for the global consumer at $120 oil.

The math is pretty easy because the US consumes 7.5 billion barrels of oil and oil products each year.

In sum, I have been involved in stocks for almost 30 years and this is the most dynamic, intellectually challenging period I have ever experienced. I will be back with more details on certain names, but in the mean-time, please take a look at the charts on OXY, CHK, XOM, COP and CVX. I value your insights on this sector.