Heads up: Tomorrow (Friday) I will be appearing on two radio shows. The first is 11:15 AM EST, on the Sam Sorbo Show, which is syndicated nationally on TRN (Talk Radio Network).
Then, also tomorrow, I will be on Wayne Root’s radio show (790 AM, Las Vegas. 790talknow.com ) at 8:20 PM EST. Hope you can join me on both…I’ll be covering our stealth bull market, the hottest sectors to invest in and I’m sure Wayne and I will include some political observations as well.
Oil – Surging More Than 5% Today. Dow Jones up 125 Points
One of the keys to global stock markets, as we have been covering here at the VRA, is the direction of oil prices. Namely, if oil has in fact bottomed, then we can be even more certain that stock prices are headed higher as well.
Yes…everything that I see tells me that oil has bottomed. I continue to believe that we have seen the lows and that while a quick recovery to $60 or $70/barrel isn’t in the cards, we’re also not headed back to sub-$30 prices. As long as oil can maintain a steady move higher, the pressure on energy stocks will continue to dissipate…and buyers will begin to come back into the group (forcing shorts to cover some very large position sizes).
The Macro Story Behind Oil. Bullish for Broad Markets. Bullish for Banks, China and Biotechs.
A bottom in oil is also a primary reason for the solid move higher in financial/bank stocks (their loans to energy co’s will be repaid…most of them, at least). And, because the financials make up roughly 30% of the S&P 500, this is also very good news for the broad markets. Just another reason for us to remain bullish on stocks.
Combined with the hugely important (but seldom talked about) broad based move higher in base/precious metals…taking them to 2-3 year highs…I continue to see a global reflation trade underway. And yes, I see a bottom in the biotechs as well…this group is still down BIG from it’s highs…and as we’ve been covering, I see a major catch-up trade in the works.
Finally, here’s the updated 3 year chart for oil. The decline from over $100/barrel has been brutal…but once the price of oil broke its 2 year downtrend line, I stopped being bearish. Now, it’s also surpassed its 200 day moving average…while its 50 dma remains at $46, so more work to do to go full-on bullish.
But take a look at the volume expansion…similar to the increases in volume that we have seen in the miners and biotech, this increase in volume tells us that the big money is coming back into oil.
Boy oh boy…would this ever be good news for this horribly beaten down sector. I know lots of my neighbors would begin to breath a little bit easier as well (the layoffs have been tough).
Here at the VRA, I am not ready to make energy stock additions to the VRA Core Portfolio. At the same time, rising oil prices will help in making us massive profits with our existing positions.
Lots of reasons to hope for a continued recovery in the price of oil…either way, the lows are in place.