Market sentiment: crude oil bets reach a four-year high

In just within one month, all the stars have aligned and we now have the perfect set up for a major major top followed by a sharp decline which probably will be even more dramatic than what we experienced in 2008. See for yourself the previous "achievements" of Mr Market:

1. No New Normal Next Year Seen by Strategists Predicting 11% Gain in S&P 500
2. Hedge Funds Raise Commodity Gain Bets to 4-Year High
3. Put Call Ratio: Everyone’s Betting On The Bull
4. Volatility is back to April 2010 levels
5. Rydex Nasdaq 100 Bull/Bear Ratio At Highest Since Dot Com Collapse
6. US CEOs Most Optimistic since 2006
7. Extreme bullishness in emerging countries, money pouring into stocks at the fastest pace since 2007, biggest rally in 16 years
8. SentimentTrader.com: Equity Hedging Index is at a new record low
9. Trading of U.S. stock options soared to the second-highest level in nearly four decades of history
10. Please also note that the put/call ratio is dangerously approaching the historically low level of April 2010
11. Volatility as measured by the VIX falls back to April 2007 levels
12. Best time to buy stock in decades (yes, there's an ending 's' at decades)
13. Jim O'Neill, Goldman Sachs Asset Mgmt. chairman: "2011, Year of the USA"
14. Market Sentiment: Margin Debt Soars to Highest Levels Since September 2008

And adding to this nice picture, Bloomberg now tells us that crude oil bets reach a four-year high:

Jan. 4 (Bloomberg) -- Hedge funds raised bullish bets on crude oil to the highest level in more than four years on speculation that futures will climb as the U.S. recovers from the deepest recession since the 1930s.

The funds and other large speculators increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest total in records going back to June 2006.

Mounting evidence that demand will advance as the U.S. economy improves is boosting speculation prices may top $100 a barrel for the first time since the beginning of the financial crisis in September 2008. Global oil use will increase 1.7 percent to a record 87.8 million barrels a day this year, according to the U.S. Energy Department.

[...] The most-accurate forecasters in the oil market a year ago are forecasting a second straight year of gains in 2011. Sanford C. Bernstein & Co. says crude will average $90 this year. Natixis Bleichroeder Inc., which tied with Bernstein, sees $100 a barrel, 26 percent higher than in 2010.

Oil prices will average $93 a barrel this year and are “very likely” to climb above $100, Jason Schenker, president of Prestige Economics in Austin, Texas, said yesterday in an interview with Deirdre Bolton on Bloomberg Television’s “InsideTrack.”
[...]
“Crude oil prices are up, and people expect them to keep going up,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It speaks to the frame of mind that people are in more than it speaks to the underlying reality. We have no physical tightness here.”
[...]
Net-long positions held by managed money have almost tripled since May. They rose by 9,578 futures and options combined to 217,046 the week ended Dec. 28, according to the CFTC report. The category includes hedge funds, commodity trading advisers and commodity pools.

Producers and merchants sold crude for the fourth straight week, expanding their net-short position by 2.4 percent to 177,958, the lowest since the week ended Sept. 17. The category includes oil and storage companies that may sell futures to lock in prices for future output.

In other markets, net-long positions in natural gas held by managed money, including hedge funds, commodity pools and commodity-trading advisers, in futures and options combined in four natural-gas contracts increased by 379 futures equivalents to 70,673 in the week ended Dec. 28.

The measure of net longs includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.