ELAM: Oil and stock prices likely topping

The Reuters/Jefferies Commodity Resource Bureau index peaked in 2008 around 460 after rising from 180 in year 2002.  By 2011 it had regained 370. The oil price collapse beginning in 2014 has now taken us back to CRB 180. The take-away here is that commodity prices have been falling for ten years.

Three weeks ago amid massive bullish sentiment for stocks and oil price, we suggested that one  should exercise caution in the markets. Since then stock averages have flirted with their October 2018 highs, Google’s earnings growth has slowed, crude oil has fallen from $66 to $62, and natural gas trades at $2.60.

Trump brags that he asked OPEC to increase production and lower prices. But we noted that price had increased 50% from its low of $42 and there was no lack of supply. We have drawn attention to the anemic performance of the Energy Service XES ETF. It peaked at $12.50, dropped below both the 50 and 125 day moving averages and is now $10.91. It never rose above the 200 day moving average of $13.10.

Bell weather Halliburton HAL trades at $27.75 at a mere 13.79 price earnings ratio. Patterson PTEN is trading for half its 2018 peak of $25 at $13.43. And PTEN is not making any money with a loss of $1.46 a share. Schlumberger SLB is in a two year slump falling form $77.50 to $41.27.

What does this mean? These are all flashing early warning signals of lower prices. The Shale ETF FRAK is confirming this prediction by falling under all three of its moving averages of 50,125, and 200 days. And the refining ETF CRAK has done the same.

The stock market remains a crowded trade with investors still clinging to AMZN, FB, and NFLX. Google as noted has dropped. Twitter and Yelp have attracted some money, no wonder given the high prices of the first three.

Seasonally the stock market tends to top after tax day April 15. Hence the phrase, after May go Away. Momentum indicators on the various indexes peaked in February. So the typical seasonal affect seems to be taking hold.

Yes the economy is great. There are more jobs available than unemployed individuals to fill them. Social mood in Washington remains on boil with Democrats claiming the Attorney General has lied to them. Their real worry is that he will make good in his promise to investigate the origin of the Trump dossier.  Over 20 Democrats have now officially entered the Presidential Race. Brace for more anti-Trump rhetoric.  Will that mood eventually seep into Wall Street?