ELAM: Better news for the Permian Basin

The entire energy complex is improving in price after lagging the overall stock and commodity markets this year.

Previously I suggested Apache (APA) was worth a look. It has fallen from $45 last summer to $30, a loss of one third of market cap. Its current dividend is 3.36%. It has been testing support at $30 since January.

XLE is the ETF of major energy companies. Since last fall it has fallen from $92 to a double bottom at $79. It has now broken above all four moving averages I track. Since January it now trades at $87.

West Texas Intermediate (WTIC) bottomed at $68 in December. It has now moved above its 200 day moving average to trade at $78.26. I would like to see a break above $80 this next week to take out resistance.

Unleaded gasoline futures (GASO) have soared from $2.00 in December to $2.58 today. Pay attention to the markets, not the politicians running for re-election or the FED trying to justify their mishandling of interest rates, gasoline has jumped 29% in three months. If this continues into summer driving season, it will be tougher for Team Biden to wear Gerald Ford’s Whip Inflation Now WIN button.

This is also allowing Russia to continue its war in Ukraine. Shipments to China and India have provided plenty of cash to buy 155 mm artillery shells from North Korea.

Now to the world markets. China is in the grip of a bear market. Heavily oversold, the Shanghai Exchange jumped from 2,650 to 3,000 in February. But it is down from 3,450 in 2022. Multiple problems abound. The centralized economy has not produced an Nvidia or breakthrough in Artificial Intelligence. Giant property developer Evergrande has been liquidated. Country Garden faces a liquidation petition from creditors for failing to make a loan payment. Country plans to oppose such action but unfinished projects abound. Buyers have lost their down payments only to find empty shells of properties.

The Magnificent Seven (see www.themarketperspective.com) are less so. Amazon and Meta/Facebook eek out new highs while others pull back. This process is a broadening top with previous owners selling to recent buyers.

Our most reliable indicator, the NYSE Advance Decline, is still climbing but well extended. Seasonally, stocks rally from October to tax day, April 15. It has done just that so far. It looks like stocks may hold here for at least that much longer.

When the final top is finally in, I suspect a large pullback.