Weekend March 12 2017
Stocks, bonds and oil all declined last week. Markets are at a confluence of multiple cycle highs and lows
Update Monday morning
Tom McClellan belies oil prices are likely to fall further..
He bases this on the positions of commercial traders. My experience is that the commercials versus other trader information is interesting but not always\reliable.
Wall Street Journal Energy Report Monday March 13
OIL IS DOWN AND INVESTORS BRACE FOR A SIMILAR REVERSAL IN STOCKS
Oil prices remained depressed on Monday weighed down by concerns about rising U.S. production.
Brent crude, the global oil benchmark, fell 0.68% to $51.02 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.80% at $48.10 a barrel.
Previously oil prices had been edging up, since last November when the Organization of the Petroleum Exporting Countries and external producers including Russia sent a jolt through the market with an agreement to curtail global production.
But concerns about growing oil inventories and a ramp up in U.S. shale oil production has shaken the market. Read our latest market report at wsj.com.
The number of rigs drilling for oil in the U.S. rose by eight in the past week to 617, according to oil-field services company Baker Hughes Inc.
“After peaking at 1,609 in October 2014, low oil prices put downward pressure on production and the rig count receded. However, the rig count has generally been rising since the summer months.The US. oil-rig count is typically viewed as a proxy for activity in the sector,”writes Joshua Jamerson.
Oil’s downfall, following an earlier bull run, is a cautionary tale for investors who are bracing for several potentially market moving events that could dampen the recent surge in stocks and other commodities.
Stocks
Notice that the DJIA has given back near all of the 300 point gain the day after Trump's address. Now the next text is to valut the up trend line.
Interest Rates
Interest rates across all maturities are about to break to the upside. The market is well out in front of the FED in terms of rates rising. Again the big surprise this year is liable to be\just how fast rates do rise.
Brent
Brent has broken down and approaches a longer uptrend line. Breaking that line to the downside
would be a serious deflationary trend.
West Texas Intermediate
WTIC displays the same pattern. We should know the outcome this week.
XLE Energy Stocks
Energy stocks have have rallied 50% off their lows while crude oil pretty much doubled in price. And the XLE is already at its uptrend line.
This could be an early warning signal of more trouble in the oil patch.
XES Energy Service
Energy Service XES has already fallen to its 50 week Moving Average. MACD at bottom has crossed to the downside.
So both sectors will be giving important clues the next two weeks.
Gold Bug Index HUI
Gold stocks put in a huge correction dropping from 280 to 160. But this index closed up 2.89% for the week. It is too early to tell if this
will be a higher low but it has that look. Will gold stocks make a bottom as the overall stock market tops out?
U S Dollar
the dollar tested prior resistance at 100 and bounced back. It remains strong in a world hard pressed for Western Leadership.
Bottom Line
The combination of multiple time cycles coming together now, the strong move up in equities since the election, even Trump's assertion Friday that this
job number is for real, the piling into ETFs by small investors, the approaching seasonal high at tax time, all suggest caution. We maintain that drops in oil prices are
not supportive of a stronger economy, just the opposite. More oil is deflationary. Oil producers the world over are producing more oil than is demanded. Why, well to pay down debt accumulated om the heady days of $100 oil. We have noted that all us debt is now 370% of US GDP, or here we go again ala 2008. This would be a good time to raise cash, and watch as things develop.
Following the comments in the WSJ Energy Report above, we observe that the situation is much like 21014 when we continually asked, why are oil prices this high?
Now price has doubled resulting in a rising rig count and as we note, production to pay down debt. The world is flooded with oil and even the Saudis are dropping prices.\This morning
oil is down another 50 cents or so. One analyst this weekend suggested $42. That is the last significant low on the WTIC chart shown above, so it makes sense.
Social Mood
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