Weekend August 4 2019
Oil and Stocks Tank, Gold Soars
Energy service companies continue to struggle. The XES ETF already trades beneath its 2009 panic low. Now trading at a mere $8.79, it looks to re-test its May low of $8.50.
The one area that is bullish is precious metals. Gold has soared from $1,280 to $1,420 in the last couple of months. It has spent July working off the over bought condition by moving mostly sideways. This has finally ignited interest in silver which has jumped form $14.40 to $16.60.
Our bottom line is for further energy share price correction the next two months. Metals may well get a boost from lower FED funds rates.
July 26 Column, spot on predictions
This column has warned that the weakness in the Energy Service XES ETF was telegraphing real problems in the energy sector. That reality really hit home Thursday. Energy stocks are down 19.5% and crude oil 27.2% since June 2018j. Thursday crude fell 7.9% to $53.95. The XLE Energy ETF cratered 2.26% now trading below all four moving averages I track.
The headlines on natural gas are as bad as they were at the last low around $1.90 in 2016. But apparently mood will need to become more negative. Natural gas and oil are in abundant supply world-wide.
We have been looking for a low in stock prices in late August to mid-September. That move down officially got underway as well this week. The DJIA is down from 27,400 to 26,583. There was tepid activity leading to the FED rate cut this week. But Trump’s tweet threatening further tariffs on China knocked 611 points off the DJIA. So much for the FED rescuing the stock market.
Lowe’s is laying off thousands of assemblers at its stores. The retail ETF XRT was slammed from $43.4 ot $41.21 as investors fled those stocks the last couple of days.
What does all this mean? I suspect lower energy and in particular retail share prices is predicting a big slowdown in what has been 3% quarter over quarter growth. We warned a year ago that trade wars were not easily won. Now firms departing China are not necessarily coming back to the USA. This past quarter growth was under 3%.
Finally, as predicted, gold prices are soaring. Despite recent strong gains gold is up over $17.30 this Friday morning. This is predicting further currency wars world wide, another a consequence of ‘easy to win’ trade wars.
As I write Friday morning in pre-market trading, the DJIA is down another 61 points. Brace for further decline amid world-wide negative social mood.
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