ELAM: Oil prices fall, stocks in counter trend rally

The U.S. remains on track to impose tariffs on Mexico next week.

WSJ Today

Mexican tariffs will only raise the cost of Mexican made products (hold the guacamole) for Americans.

Across the pond, Theresa May exits 10 Downing Street, but that won’t make fixing Brexit any easier.

Rather than accepting the Mueller report and getting something done, Nancy Pelosi is now trying to convince her impeach crowd to convict Trump after he leaves office, i.e., lock HIM up.

Centrist Democrats who won in districts Trump carried (a couple dozen) are and should be worried.

France nixes the Fiat-Chrysler deal with Renault, a merger of second-tier companies if ever there was one.  This does speak to the weakness of the entire European economy. 

Russia disagrees with the Saudis on ways to boost the sagging oil price.

China tech stocks hit a bear 20 percent sell off measured by the CHiNext Price Index. Oil prices have dropped from $66 to the low $50s, another 20 percent swoon.

After raising interest rates weeks ago, the Fed debates lowering them.

The EU is pressed to lower their rates which are already negative. All of this reflects our theme that the social mood turns negative worldwide.

Regular readers are aware of our warning that weakness in the XES Energy Service ETF was broadcasting a warning signal. Crude has dropped more than 20 percent and is trading below the four moving averages I track.

Expect a counter trend rise here before the downturn resumes in July. The XES and XLE are so oversold, they, too, look ready to bounce higher.

Having abandoned coal-fired plants, Australia, an exporter of LNG, is now short of supply itself. Lacking a proper pipeline infrastructure, companies are threatening to leave the island unless reliable energy can be provided. Perhaps this will take up some slack for Texas exporters facing Chinese tariffs on LNG.

We have serious divergences in the stock market. Yes the DJIA has rallied one thousand points in the last week. It has not been joined by the Russell 2000, or Dow Transport indices. Both are trading below all four of my moving averages.

Gold has gotten ahead of itself in an 80-point rally. I look for a pullback from 1,348 before that rally resumes.

Movie audiences turn to horror and crime films when economies decline.

“Quiet Place” was followed by “The Dead Don’t Die” and now “M.”

Horror films are returning big profits on small budgets. “The Highwaymen” is released by Netflix; a take on Bonnie and Clyde from the lawmen’s perspective. Our first and last paragraphs indicate just how quickly social mood is turning negative.

dennislelam@gmail.com