Stock and Oil Prices at Resistance

Friday May  17 2019

Stocks and Oil Still Facing Resistance

 

5/17/19 8:15 AMC CST The United States is now a net energy exporter with production exceeding that of Russia or Saudi Arabia. If you are in the USA conducting the energy service business, what could go wrong?

 

Weatherford International delisted from eh New York Stock Exchange. It is now traded on the pink sheets and plans a July Chapter 11 (Reorganization) bankruptcy.

 

China’s decision to impose 25% tariffs on US LNG comes as developers are poised to make final investment decisions for several Gulf Coast Projects.

San Antonio Express-News today

 

Two-thirds of CFOs expect the US economy to enter a recession by third quarter 2020. Half expect a recession by the end of 2019.

Duke University Survey

 

And by the way the SA Express News is owned by the Hearst Corporation which itself is in Chapter 11 proceedings. The Chinese specifically targeted the multi-billion dollar projects underway along the Gulf Coast. If this ‘trade war’ is prolonged (which is my guess) that will lower return on investments for those companies. The construction of export terminals assumed a growing Chinese market for LNG.

 

Volatility is back in the stock markets. The DJIA fell from 26,400 (rounded) May 6 to 25,300 by may 13 and had regained 25,862 by Thursday May 16 close. To challenge the previous 26,600 high the DJIA will need to close over 26,000 today, the end of the week. But the DJIA is trading down 200 points this Friday Morning. For now trends are up but keep the big picture in \mind.

 

The Dow Transports tend to be the leader in direction for the markets. The first peak was in January 2018, the next in September 2018 and then the recent high in April 2019. That last high was lower than the previous two. This is a negative. The Russell 2000 small capitalization index has the same look as the Transports, another negative.

 

The US sent both a carrier and bomber group to the Mid East transiting the Straits of Hormuz with little interference from Iran. Reports today indicate that the US thought Iran would attack first and apparently Iran thought the same of the US. That activity raised thee price of crude 1.37% Thursday.

But if trade wars slow the world economy, demand for crude will ease.

 

All of this reminds one of President Harry Truman’s wish for a one-armed economist. In that case, quipped Truman, he could not say, well Mr. President, on the other hand…..