The Market Perspective

Crude Oil Taking Its Time to Correct

Weekend

USO Crude Oil

 

The correction in crude seems to be taking forever. But it looks a lot like what happened int September. Then after a big run up, it took some three weeks to bottom.  Now price has stopped or at east paused at the 200 bar line. this is two hour or 120 minute chart.

 

I have looked at the four hour  240 min charts for all the energy service stocks I track.. I believe we just need to be patient, a bottom looks a week off.

More to follow in Sunday update, check back.

Sunday Update

The arrows highlight what appears to be a two year cycle. If that is the case, the Dollar is topping as various energy shares continue a bottom process.

WTIC has a positive correlation to the Canadian Dollar

Dems What's the Problem?

Friday Jan 17, 2020

Weekly Newspaper Column

Dems, What’s the Problem?

 

The vote was 89-10 as an overwhelming majority of senators of both parties supported the agreement, as expected. Last month, the House of Representatives approved the revised agreement by a similarly wide margin,

Senate Approves USMCA Trade Deal 89-10

And in the same week, the Chinese apparently decided Trump will be the next US President and signed Phase One of a trade deal with the US. The thing to note is that the Chinese did not wait for the November election. They are not hoping to revert to another go along to get along, ‘yeah we know the Chinese cheat our pants off on Intellectual Property Rights but so what?’ that sounds like a bet on a Trump victory to me.

P T Barnum was the ultimate showman in his day but the Donald is surely his .The Democrats can’t wait to discard the the first two amendments to the Constitution as well as the Electoral College but roundly endorsed the document in Impeachment Proceedings this week. To cap it off several stock indexes hit new all time highs and Google topped a trillion in market value. Oh, and Trump held a rally in Milwaukee as the Democrats ‘debated.’ Years ago Democrat strategist James Carville noted it’s the economy stupid, and that has merit today.    Top that with record low unemployment for Hispanics and Blacks, and well, I am guessing Americans will vote their pocketbooks.

This column has taken the position that the energy sector hit a long term low last August.   Share prices and crude oil itself advanced to about $65. We have had the inevitable correction since, with crude up Thursday and another 36 cents today.

Predicting oil prices also requires a look at the entire energy complex. I would call for the low in crude oil based on the last couple of days BUT (gee there is always a but) heating oil set another low Thursday.   Let’s hope it turns up today.

Energy trusts like PBT and MVO had nice advances, Prudhoe Bay BPT jumped 50% since November but gave back a lot this week. The increase there and in Nustar NS and Alerian AMLP is also encouraging.

Natural gas futures like heating oil sagged again Thursday. Looks like it will test the August low at $2.05, now $2.08.

Our bottom line is this. The overall stock market is behaving like early 20158. Then there was a similar parabolic advance. That was followed by an eventual DJIA 3,000 point correction and up and down movement until a larger collapse in the fall. My take is that the FANG stocks are overdone here and a top is likely this next week. The surprise may be in beaten down energy and metals, if the US Dollar continues to weaken.

Follow Dennis at http://www.themarketperspective.com

OIl Drops Five Straight Days, A Bottom in SIght?

1/14/2020 Tuesday

The headlines look terrible for oil prices, so are we closing in on a bottom?

USO an ETF for oil can be tracked intra-day on stockcharts

240 min chart USO

Okay this is but a  .66% move up but this is about where I expected some support. Note the bap in early Dec at far left, we might have to fill that yet. But time to start looking for a low.

Natural Gas

Okay it is only .23% up but amid these terrible headlines, this is the sort of thing to watch.

Iron Ore CLF

 

CLF advanced 3.95% today right off its trend line.

Tanger Outlet Mall SKT

 

One can hardly find a parking spot on the weekend, SKT pays a 9% dividend, an everyone hates brick and mortar retail.

SKT Weekly

 

The moving averages have not turned up yet but are converging. It may take another dip or two.

Nustar NS

Bill Greehey bought $15 M of NS stock recently at the $28 level.  It dipped after he bought but is rising wel.

William E. (Bill) Greehey. Bill Greehey is Chairman of the Board of NuStar Energy L.P., and NuStar GP Holdings, LLC, both of which are based in San Antonio, Texas. NuStar Energy is a publicly traded master limited partnership that is one of the largest independent liquids terminal and pipeline operators in the nation.

now

The weekly chart shows why Bill is interested in NS breaking the $28 level.

I remain bullish energy. The trend in the USD has turned down on the daily chart. This will be suportive of higher energy and iron ore prices.

Thanks for reading the Market Perspective.

 

OIl Price Conosolidates

Friday Jan 10, 2019

 

Oil Prices Consolidate, A Bottom for Natural Gas?

 

US crude futures edged down Thursday to their lowest level in four weeks.

 

Wall Street Journal Today

 

This is a column about energy markets, which makes sense as our newspapers are in the Permian Basin. The Permian Basin has returned to its rightful place as the largest producer of crude oil in the USA.

 

This column often has a currency focus as oil is priced internationally in US Dollars. Hence a weak US Dollar tends to bolster crude prices and a strong Dollar weakens the price. Sure enough the peak in the Dollar three months ago in early October was at 99.25 That saw a low in WTIC around $52.50. The Dollar index has fallen since to 96 and now risen to 97.16. Crude oil raced to $65 plus.   The column has been consistently bullish on oil prices, noting a low in the complex last August.

 

At present our view is for a weaker US Dollar in 2020. . This would be supportive to commodities, like oil, natural gas, and metals, priced in dollars.   The US Dollar sold off from its October high and has rebounded. Likewise, the Canadian Dollar, a currency in a commodity based economy, rose and is correcting. I expect this will end in a week or so with the US Dollar falling again.

 

Critics will no doubt point to the Iran dust up as having ‘saved’ my prediction. But there is typically a fundamental event in any of these markets to justify the technical analysis.

 

The result of taking out the Iranian General and his subordinate was a step back by Iran. While I have not read anyone commenting, surely the reality that the US can take out two autos and passengers with no loss of US life and all loss of Iranian life made an impression on their leadership.   And so crude oil prices posted an outside reversal week to the down side. This is normally a negative. But after a big rally of $14 I three months, a correction was due.

 

USO is an ETF proxy for the United States oil price. Despite the sharp correction, it remains in an uptrend from the October low.

 

Our suggestions have worked well. Various Energy Trusts such as PBT, BPT, MVO, and MTR have advanced in price. And they are still paying fat dividends.   Alerian Master Limited Partnership AMLP an ETF of MLPs, rose from $770 to $8.70 and also pays a 9% dividend. And our long suffering benchmark Apache APA has soared from sub $20 to over $30 on an overseas oil discovery.

 

I would rather buy out of favor energy plays paying nice dividends than dabble in Apple at $300 + in its upward parabolic arc, but to each his own.

Are We Completing Wave One for Energy Trust?

Tuesday Jan 7, 2020

Permian Basin Royalty PBT

 

It appears we have completed Wave One up for PBT.This makes sense as the fifthe wave was caused by taking out the Iran General. A  50% re tracement is 3.85 which is also the 200 bar EMA, and the previous 4th wave low. Note we have alternation  with a quick sharp wave 2 but a slower long sideways Wave 4.So this looks pretty textbook.

Now we should expect an A B C correction,  A Down which is underway now, B up and then a final C ending around  3.85.

 

And over all the move up from Dec to early Jan should be a Wave One on the daily scale.

 

Dollar Weakness Boosts Commodity Prices

Monday January 6, 2020

The Canadian Dollar is gaining on the US Dollar. As Canada is a commodity economy, energy,precious metals, the EWC ETF is also advancing.

 

Gold hit a seven year high today.

Ratio Chart of Canadian Dollar to US Dollar

When this chart is advancing the Canadian Dollar is rising  way faster than the  US Dollar. As gold and energy in our country are priced in US Dollars, energy and gold are soaring.

Are my ideas making money?  Here is a screen shot of the energy side of my 401 K for today.

The really good news is that this is just now  getting underway.

HAL - notice weekly 34 EMA is about to cross 13 EMA generating a buy signal

Look closely and you will see this  did not really get going until December.

HAL and US Dollar

The rectangle highlights the low in HAL occurred at the high in the US Dollar, hello globalization.

Our prediction for 2020 is a weaker US Dollar which will stimulate foreign markets in terms of US Dollars.

FCM is making a higher low and challenging its long term down trend line

 

FRAK  The media is quite negative on shale producers. And indeed many have taken on too much debt. But many are also in  Ban kruptcy now and or are selling to someone else.  LIke FCX, here s another chart to watch.

The big money is made by getting in on the start of a trend. The ratio change in the USD versus CDW is such an example.

CRAK the Refiner ETF

The top five holdings are

Reliance Industries

Phillips 66

Marathon Pet

Valero Energy

Neste Corpp

These are solid blue chip companies. And trust me, Valero hedges and plays futures to offset currency and energy price arbitrage.

And one more solid company VIPER VNOM

VNOM is completing a 1.5. year 50% correction, another buy.

Energy Extended, Stocks Still in Uptrend

Weekend Jan 5, 2019

Energy and energy service are extended, SLB looks like its peak in Sept, MACD is maxed out.

 

SLB finished off high given the drone killing of the Iran General, but looks like it needs acorrection.I am not looking for the big move down we had into October.

XES same thing

Likewise gold is ahead of itself.  A weaker dollar has helped gold and silver, silver lags.

 

Technology

 

The pullback Friday suggests that tech which is driving the NASD needs a breather Note  PMO at bottom and  OBV at top, both over done.

Social Mood

The Democrats are struggling to criticize Trumps death to the Iran General having agreed he was a 'bad actor.'  Social mood remains fractured. In terms of national mood, who ever wins will leave the other half of the country very unhappy. 

 

US Attacks Oil Jumps

Friday Jan 3 2020

US Attacks, Oil Price Jumps 2.6%

 

The US preemptively struck the Baghdad airport killing Major General Qassim Soleinani. The US claimed he and his men were responsible for the deaths of American and coalition forces.

N Y Times Friday January 3, 202

 

Friday 1/3/2020 7:34 AM CST A student of social mood would note it was pretty obvious change was in the air. Day after day, CNBC and other business media outlets crowed that ‘markets had hit new highs.’ Apple, a phone manufacturer, hit $300. The S & P and NASD also hit new highs Thursday. Secretary Poompeo delayed a trip to the Ukraine given the attack on the US Embassy in Iraq.   Oil prices firmed over $60 as did shares of energy trusts.

 

This morning the 300 point rally in the DJIA Thursday has pretty much been erased with the DJIA retreating and now down 251. Likewise the S & P 9-33) and NASD

(-108)j gave back gains.

 

The last few months and weeks, this column has suggested that energy securities trading near the 2009 lows and offering fat dividends might be a better shopping venue than the sky high NASD which has been on a tear since the Trump election.

 

Energy ETF XLE has moved over $60 as has the price of West Texas Intermediate. The Energy Service XES has finally rallied from about $6.50 to $8.11.

 

Meanwhile there is news in the Permian Basin. Five new pipelines will come on line through 2021. Current output is about 4.72 million barrels per day. The new pipelines will allow for some 6 million bpd.   Will production overwhelm price? Perhaps that will not be the case.   Shale producers are cutting back on investment given high debt levels and frankly more oil than they could sell. Now declines in production from older wells are not being offset by the newer wells. This may bring production and supply more in line with demand. The $2.33 bump in price today   is yes a result of a ramping up of Mid-East tensions. But it is also a vote for stronger prices above $60. This is what we have been predicting price-wise, the fundamental events are simply confirming that.

 

Now what about the new lows in natural gas prices?   Today’s WSJ headline reads, Slump In Natural Gas Drags Into 2020. This is the same headline we read on oil prices this past summer. Price has fallen to $2.12. A weekly close over $2.29 will suggest a low is in place. Prices of gas producers like Devon are already rising.

 

It is tough to buy low as the social mood never argues for it. But, 2020 is looking bullish for the energy sector.

2020 - Year for Commodities

Weekend Dec 29 2019

It appears that the US Dollar is weakening. This is providing strength to commodity prices, specifically metals and  energy.

U S Dollar and Silver

 

As th esiler price is denominated in dollars in this country the ratio chart of the dollar versus silver is same as the silver chart.

Here the US Dollar is falling while at bottom silver is climbing, copper looks the same, oil has yet to really get going.

Energy trusts may be a bit ahead of themselves.  The trading has exceeded my expectations on what should have been slow days Thursday and Friday.

Gold in  particular really took off and may be a bit ahead of itself.

 

I don't know what it means economically that the dollar may be weakening,  perhaps the perception that the US is not the master of its own trade deals, who knows, but that is what is happening.

I do expect a better year for gold silver copper and energy markets. It may be that they outperform the SPX.

 

Will update as the week unfolds

 

Blaze of Glory

Friday Dec 27 2019

 

A Blaze of Glory

 

Let's go out in a blaze of glory
All good things must end
Like two heroes in a story
Let's go out like we came in
In a blaze of glory

Kenny Rogers, A Blaze of Glory

 

Social Mood is unconscious,, unremembered, and constantly fluctuating

Tenet Four of Socionomics

 

Our opening quotes refer to the wild swings in both stock and energy markets since Year 2000.   In years 2000, 2008, and 2019 the NASD registered 5,000, 3,000 and now 9,000 (peak numbers are rounded). The aftermath of 5,000 and 3,000 did not end well. That is the reason for our second quote above. In the midst of all this excitement (see Dirty Harry, bank robber scene), investors fail to remember the past and are swept away by the present (CNBC, markets are at record highs!).

 

I suspect markets trend up into the November 2020 election. Whichever way the election goes, there are going to be a lot of disappointed people.   Kim Strassel notes that Nancy Pelosi may well keep the impeachment papers bottled up into the election, choosing to win innuendo rather than a Senate vote.   Either way, post-election, the pro-Trump or Trump-deniers will be furious. That will note make for a positive mood scene.

 

For now, my suspicion that energy markets would make a low in Fall 2019 was actually a bit late. The lows came in August. West Texas Intermediate broke  the resistance at $60 to trade at $61..85 today. The long-suffering XES Energy Service ETF has catapulted from $6.50 to $8.13.   Don’t laugh that is a 25% increase, coming amidst gloom and doom reports on the industry sector (which is always the way bottoms are formed). The XLE Energy ETF is knocking on resistance at $62.

 

Jerry Jones has invested a billion dollars in Comstock Resources, up 68% this year. Comstock is a natural gas provider. Again, like the energy service sector, the news is all negative for natural gas. But cold weather (it is literally snowing in San Bernardino, CA) jumped natural gas 4.48%j yesterday. That jump was from support at $2.20.   Devon DVN is up from $20 to $26.   Bet long not short on natural gas.

 

Amazon would need to tack on 450 points to match the advance in XES. And it may well do just that. But AMZN is at new highs while the XES is at decade lows.

 

After a 20% decline in Fall 2018, stocks regained that loss and then some, hence the record highs now. Real estate and high priced toys (autos and the Polaris slingshot) as second derivatives of the party are enjoying renewed purchases.

 

As with the last two peaks (2000 and 208) markets are likely to go out in a Blaze of Glory. Ten months from today, don’t stand too close to the Blaze.