Two weeks ago this column predicted a pull-back in energy prices. This week the percent of energy stocks in bullish position fell from 85% to 19%.
Polls indicate that inflation is the major concern of the public. No wonder, gasoline futures have climbed from $2.00 a gallon to $4.20 a week ago and now down to $3.84. Still the trend remains up.
Team Biden at first blamed Putin’s Ukraine war for rising oil prices. Critics noted West Texas Intermediate WTIC had risen form $35 in October 2020 to $95 in February 2022 when the war began. Plan B is to blame oil and refining companies for ‘making more money than God’ (or perhaps Hunter Biden). Exxon Mobil did make $23 billion in 2021 but lost $20 billion the year before. Team Biden apparently does not give a pat on the back for losing money when prices are low.
Exxon Mobil XOM responded noting it had invested in refining capacity. XOM asked for a clear and consistent policy on regulation and lease sales as well as streamlined regulatory approval.
Biden doubled down with another letter demanding more refining capacity. In fact the industry is operating at 94% capacity now. The last new refinery in the USA was built back in 1977. AOC’s war on carbon fuels is working with the 35% that still approve of Team Bidden, what is the problem Joe?
Words matter, perhaps Team Biden is beginning to notice. His campaign promised a war on fossil fuels. Well, here we are with the highest prices since 2014. Complying with every EPA imaginable only got the Bidden retort, ‘they pollute.’ Refiners responded that one does not make muti-billion dollar investments based on short term events. Seriously given the negative rhetoric from Team Biden and already the threat of excess profits taxes, would any reader build a new refinery in this environment?
Crude hit $123 briefly this week and settled at $115.25 Thursday. The collapse in energy shares trading in bullish territory is the best indicator suggesting investors are taking profits on the run-up in energy shares.
It took from March 2000 until October 2002 for the NASD to lose 75% of its value. In nine months that index has lost 31% of its November 2021 high. The DJIA has dropped 19%, the Transports and SPX 23%. This column has noted that individual stocks carry different weights in computing overall averages. Counting equal weights the NASD peaked in February 2021 with 85% in bullish position. Now a mere 12.83% are in that rare category.
The number of new lows on the NYSE hit 1,092 Thursday which is the highest number so far in this sell-off. That suggests a bottom may be at hand. Major news media are making much that the stock market is in bear territory (they just now noticed) so that in itself is a contrary indicator.
Look for a market seeking a short-term low over the next couple of weeks. We expect a lower high in September or October. But make no mistake, this is a bear market.
