The Market Perspective

Crude Oil Attacks Resistance

Monday April 22, 2019

 

Crude oil is up $1.68 Monday morning or over 2%. This may be a first indication of an attack on the $66 resistance level.

Gold did not hold on to the early $5 gain but it up 50 cents at 11 02 AM CST.  XAU is trading at  72 down 88 cents. XAU needs to find a bottom this week if the rally is to continue.

 

April 19

Friday April 19, 2019

The Recurring Case of April 19, 19

 

We suggested caution regarding the markets in this column two weeks ago.   Some ETF stock indexes have made new highs. While there are many optimistic expectations given the low unemployment numbers, stock market action looks a lot like September 2018. That led to the October 3 top and a 4,000 DJIA drop. That is not a prediction but again a caution. The charts suggest this as a real possibility.

 

Crude oil has yet to break above $66 measured by West Texas Intermediate. Gold should be making a 13.5 month low now. Several technicians are forecasting lower prices for gold, next week will tell the story.

 

The date of April 19 has a remarkable coincidence marking aggressive human acts.   Consider these events which occurred on that date.

 

• Start of American Revolutionary War
• Start of American Civil War
• Start of Spanish-American War
• Bay of Pigs Failure in Cuba
• End of Viet Nam War

 

 

 

And the date is living up to its reputation again. Consider these events this week.

 

• Release of Mueller Report, rather than accept it, Democrats now say it is up to Congress to ‘continue the investigation.
• Notre Dam Cathedral burns
• Tucson, AZ declares state of emergency unable to handle influx of illegals
• North Korea fires short range missile

 

 

America abandoned the gold standard April 19, 1933. So it was no coincidence that China picked April 19, 2016 to announce its own Shanghai Gold Fix.   China is now the largest producer and consumer of gold.

 

This is part of a much larger pattern of aggressive Chinese behavior. This of course is being ignored while our Congress works on the important things like demanding Trump’s tax returns.

 

China has adopted an aggressive Made in China 2025 plan for economic expansion. And there are at least three other initiatives at work.

 

First is the New Silk Road construction Project. This is a revival of the original 207 BCE Silk Road during the Han Dynasty. It will link China to East Africa, West Asia, and already Europe.   China already controls 10% of European water ports.

Next is the Asia Infrastructure Investment Bank. This is clearly a challenge to the World Bank and the International Bank for Reconstruction and Development begun at Bretton Woods in 1944. Significantly the US is not a member but most Asian nations are members with much of Europe on board.

 

Finally there is the construction on the Spratly Islands in the South China sea.

 

While American politicians cannot see beyond the 2020 elections, China has a long range plan which is clear to see, if only the USA would take a look.

 

13.5 Month Low in Gold Taking Hold

Tuesday April 16 2019

The cycle low of  13.5 months was due in March. That occurred but it apparently being re visited in April.

This Friday is April 19, an interesting date of considerable historic significance.

https://en.wikipedia.org/wiki/April_19

 

This marks the date of the start of the Revolutionary War and the US Civil War.

It looks like the XAU will make a secondary low this Friday.

The XAU dropped below its daily MAs yesterday which suggests weakness ahead.

Daily XAU

PMO looks likely to bottom this month.

Merger Mania

Weekend April  14 2019

Merger Fever Hits the Oil Patch

 

Anadarko stock rose 31% after Chevron offered $60.95 per share in stock and cash. The deal gives the second biggest U.S. energy company a boost in shale oil production as well as natural gas and offshore deep-water.

 

CNBC Nightly Business Report

 

This column has noted the laggard action of the second tier companies like Anadarko and Apache. That is now changing. Why is it happening now?

 

Positive social mood is inclusionary. Positive feelings about investing have led both the stock and energy markets higher. Mergers always happen in rising markets, often near the top or final rung of the ladder. A recent headline in the WSJ noted that investors were jumping into stocks for fear of ‘missing out’ on higher prices. That was not the headline last December 24 when the DJIA declined 600 points in one day.

 

Companies can catch the same I don’t want to miss out fever as well. This makes firms like Apache with its rich find in the Davis Mountains almost certainly in play.

 

In any industry is it always an individual that innovates. Henry Ford and Karl Benz were both inventing the internal combustion engine at the same time. Edison saw the future of electric generation Bill Gates saw the future of software when giants like IBM assumed all the money would be made in hardware.

 

Exxon and Chevron like IBM in the example, are late to the party. So it makes sense to buy oil in the ground from a known entity rather than start from scratch.

 

The DJIA is up about 250 points. That and merger mania has finally pushed the XLE Energy ETF over its 200 day moving average. Energy Service XES still badly lags only up one penny today and well below its 200 moving average, $12.04 versus $13.46.

 

An over supply of natural gas coupled with warmer weather has beaten prices down from $4.80 last December to $23.66. This has me wondering about the billion dollar LNG export projects underway in Corpus Christi. The Far East is not needing any more LNG at the moment.   But shares of Cheniere LNG are up 2% today to $68.47.

 

President Trump continues to be stymied in his attempts to build more pipelines. Environmentalists run to a sympathetic Judge to block attempts to complete these projects.

 

Here is our bottom line. Expect stock and energy prices to continue their upward trend into May. We speculated last week tech would lead and it is.   The seasonal tendency is for stocks to top and then slump during the summer. So far that expectation looks to hold true once again.

 

Stocks and OIl Higher into May

Weekend April 14 2019

The low risk entry was Dec 26 2018, The market is closing in on the seasonal highs that typically occur after tax day April 15.

This clearly shows the low risk entry was Dec 26 2018. Everyone is  on board now afraid of missing out on anny more gains.

I should have been more bullish when we had 600 new lows.

New Highs Versus New Lows

Higher new highs than last October.

Chevron's purchase of Anadarko puts lots of shale drillers in play. Best bet is a bet on all of them.

FRAK

This still has room to rise and stocks and oil are rising  together.  I also like Apache here.

Stock Market

An application of socionomics is that maximum mood occurs at the END of a move. That is demonstrated with the parabolic advance shown by the two blue arrows.  Markets are either at or approaching parabolic again, the big down move followed by an equally impressive up move. the steep rise now is probably no more sustainable than January  2018 or Sept 2018. But with maximum mood we can certainly head for a few more weeks into May.

Gold

The blue arrows indicate the 13.5 month lows in gold. This is a regular cycle. And given the low last August this looks like  a Wave 2 down concluding. This suggests higher prices ahead.

JNUG

JNUG has pulled  back to mid range.This ought to be a good spot to pick up some shares.

 

I like the gold sector which at least hit a new low, the overall stock market is not at a low risk entry now.

Social mood remains negative.  The Demplans for Mueller to de-rail Trump are not working well. By election day surely voters will have tired of the no cooperation on anything mood in Washington.

Caution Warranted Indeed

Wed April 9, 2019

Our column last Friday ended on literally a cautionary note.   Looks like we had that right.

 

Stocks and oil have followed one another up since last December. I expect we have at least the start of a consolidation in both markets. Gold hoever has been building a base around 1,300 since its February high at  1,375. Here is paper gold GLD which trades during the day.

Support has ben building here at  121. PMO is bottoming, this is forecasting a rally.

XOP

Energy shares may have topped at teh  125 day MA.

We have been anticipating a low in precious metals this month. It may be coming in earlier than we thought.

Higher Highs

Weekend April 7, 2019

Stocks and oil made higher highs and the momentum is obvious from the indicators.

 

My weekly column warns suggests caution is warranted but the trend is up.   It is now obvious we had a geat buy after Christmas.

Transports are still supportive.

 

Interest rates are still falling. Trump thinks this is a good thing. As noted rates are negative in Germany.

CFR

Yikes I missed the buy at  92 but probably time to buy again.

XAU

Gold and XAU have corrected sideways and have not fallen as much as I thought. Still looking for a low risk entry here in April, watch April 19.

Iron Ore

Stocks are still headed  higher we may have a slight pause given the extreme bullish outlook of near everyone.

HAL

 

Energy Service may be finally taking off, note the bump in HAL>

We are still anticipating a low risk entry in metals.

Social mood remains negative around he world and especially in the USA.  Horror movies are on the rise. Pet Sematary debuted this past Thursday a re make of the  1989 version.

For a look at where social mood is, I record Judge Jeanine on Saturday night watching her opening comment the next morning.  Her show is as biting as there is and consistently rates number one on cable tv for the weekend. This polarization will eventually show up on the markets. For now the strong job report Friday is advanced as evidence things are just great.

 

 

Oil And Stock Prices Make New Highs, but Will this Last?

Friday April 5, 2019

 

Friday April 5, 2019 6:36 AM CST

 

West Texas Intermediate closed Tuesday at $62.58 above the 200-day moving average of $61.68. Prices are up 37% for the year.

 

Signs Point to Durable Rally in Oil, WSJ, Today

 

As noted in this space, oil and stock prices have moved in tandem since the December 24, 2018 low in both. Last week we suggested strength in the Transports and Small Caps (Russell 2000) might assist in a rally this past week. And that is exactly what happened.

 

Looking at international exchanges, one has to wonder.   The German DAX for example rose from 10,250 to 11,998 since the December low. But the news today is that manufacturing orders are down 8.4% from February, 2018 (Germany’s Economy Sputters). This is all the more alarming as Germany is the strongest economy in Europe. China now owns 10% of all the European Ports, part of it s Belt Road Initiative BRI. We will be discussing this in more detail in future columns.   The point being that Italy is not generating enough Gross Domestic Product to fund needed capital investment.

 

 

Option volume on the XLE energy ETF are expanding. We also noted that the XLE and XES did not seem to be broadcasting higher prices. XLE has been flat for the last month and is below its 200 day MA of $67.90. The Energy Service ETF XES at $11.77 is well under its 200 day MA of $13.59.  If an oil price rally is so certain, why aren’t XLE and XES doing better?

 

Investing in stocks sounds easy, just buy low and sell high. But this requires that one be independent of the prevailing social mood. The headlines December 24, 2018 were that some stock indexes had entered bear market territory with a 20% drop . Investors were running away from stocks. This past week one headline noted, investor scoop up stocks afraid of missing out.  This instead is sell low, buy high.

 

Just this past week Pioneer Energy announced lay-offs given the low price of natural gas.   Natural gas prices have been falling from the November 2018 high of $4.80, now at $2.64.   One has to wonder if the abundance of natural gas and falling prices will impact the optimism of the billon dollar export terminals under construction at Port   Corpus Christi.

 

Here is out bottom line. Time-wise markets are three months or one quarter of a year from the December 24 lows.   This suggests a throw over and at least a short-term high of some significance in stock indexes. This may well be the case for energy prices as well.   Once again there is no shortage of oil. And natural gas prices are already falling. We suggest caution.

Challenging 26,000, Gold Correcting

Weekend March 31, 2019

Reports have it that this has been a stunning quarter rising from the sell off down to 22,000. True enough but I am not sure anyone had the never to jump in  December 26.  Stocks put in a an up week and appear ready to challenge the previous high at  26,600.

Transports

'Transports are doing what they need to do, rallying at teh 87 day MA. This project overall rallies into Mid May.  

The small caps are doing the same

Here is another nice set up for a rally the next month or so

Yes it is a nice pullback but at 64% already.  This suggests the ending rally will likely set the high for this year in May.

Gold

Looking for an important low by mid April for
Gold in the area shown. Then expecting a significant rally.

Silver

 

Likewise silver should record a higher low than we saw last November.  Silver has still not turned up wtih gold but that could change.

Nat Gas

 

the world is awash in natural gas, price  has dropped 40% but from a parabolic high. 

Oil superimposed on nat gas

Oil in purple is imposed on the same nat gas chart.  Could oil have another pullback like nat gas?   There is no shortage.

What about the interest rate panic?

Really all that has happened so far is that the ten year rate is re testing its 200 week MA for the first time since 2017.

The Bottom Line

We look for a final stock rally into May.  Gold and  silver should make important lows by mid April leading to a substantial rally. Interest rartes are testing an uptrend line going and long term MAs.

Social Mood

See previous post. A re make of Pet Sematary will debut this next Thursday.

https://www.imdb.com/title/tt0837563/?ref_=fn_al_tt_1

 

Weekly Newspaper Column

Weekend March   31, 2019

Stocks and Oil at Resistance

There is not much new to report on oil and stock prices. Each has tracked the other. Oil has just poked over $60 as I write this morning. Stocks measured by the Dow Industrials are still fighting resistance at 26,000.   The Transports and Russell 2000 are bouncing after sell-offs. That may be what is needed to fuel a rally higher.

However there is quite a bit to report on the social mood front, and most of it is negative.

Welcome to the 50^th anniversary of 1968’s hit movie Bullitt starring Steve McQueen in his infamous chase scene around San Francisco. His dark green Mustang has enjoyed several revivals with Ford issuing ‘Anniversary Bullit Editions’ in the same color scheme. Each time the vehicle release timed a top in the stock market, just as happened during the 1968 movie. Will history repeat?

Negative mood finds a home in horror movies. This was the case for the Depression era Frankenstein and Dracula, 1973’s Exorcist, and again today. It, a two-part horror movie based on the Stephen King novel cost $35 million and grossed $120 M its first weekend in 2017. Part II debuts September, 2019. US, a story of a family on vacation encountering a sinister parallel of themselves, has already done $70 M in its first couple of weeks release. The film’s director, Jordan Peele, is reviving The Twilight Zone for CBS this next Monday. Twilight was not horror as much as paranormal. If only we could bring back Rod Serling and his writers.

In what should be an upbeat event, Tim Burton’s release of a new version of Dumbo is deemed Bad News form the Big Top by Joel Morgenstern. He notes a grim tone and a dead soul for what was originally a joyful movie.

FX debuts yet another television vampire series next week, What We Do in the Shadows. The public can’t seem to get enough from True Blood to the Walking Dead.

Meanwhile a truly ‘grim tale’ is playing out in an unlikely forum, the Austin, Tx Ballet.   Grimm Tales recounts three stories. I won’t recount stories but this is not the Disney Snow White you remember. The appearance of horror in ballet is noteworthy.

Bond yields are falling across the globe with German yields negative again. This is a sign of fear, an inverted yield curve, not confidence.

Nancy Pelosi cannot control the negative elements of her party still contending cover-up and collusion, no matter what the Mueller report says. Serious Democrats charged with winning are realizing the public has no idea of their agenda, according

to a Politico survey.

No wonder stocks are having a tough time.