ELAM: Lazy hazy summer days

Crude oil prices are leading, the energy troops are not following.

Crude oil prices bottomed as May became June. A solid rally resulted sending prices from $73 to $81.72 as I write Friday. But after over two solid weeks of crude price rally, energy and energy service stocks have yet to find a bottom.

Let’s keep an eye on gasoline. Gasoline futures fell from early April to end of May. Now price has advanced from $2.30 to $2.50. Momentum has clearly tuned up. James Carvill was right, it’s the economy when it comes time to vote in the presidential election. A return to higher gasoline prices will dampen the incumbent’s chances.

Apache (APA) has dropped from $35 to $28. The two big guys may be offering a positive early warning. ExxonMobil (XOM) has jumped from $108 to $112.56 the last three days. The Chevron Texaco chart looks the same advancing from $152 to $157.52. The momentum indicators have yet to turn up. The bullish percent of energy stocks is still mired at 45%. This is half the number as recent as April 29.

Energy service stocks are really on the mat. Halliburton (HAL) in the same period is down from $41 to $33. Schlumberger momentum is trying to turn positive with prices up from $43 to $45.80 this week.

Warren Buffet has a stock market indicator named for himself. It is the ration of the total value of the stock market divided by the U.S. Gross Domestic Product. The stock market is forward looking predicting higher prices. GDP is a measure of what has, not will happen, so it is backward looking. Since 1975 this indicator has risen from .5, stock market worth half of GDP, to 1.87, stock market worth about double the GDP. I don’t know the indicator for 1929 or 1966, two previous market tops.

Despite its new high, only 35% of the NASD stocks are over their 50 day moving averages. The SPX is better with 53%. But both measures are down from their 2023 year-end highs of 90%. Breadth continues weak with a few weighted stocks accounting for most of the market gains.