• 287 days Will The ECB Continue To Hike Rates?
  • 287 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Oil Stocks Will Continue To Under Perform The Oil ETF

Oil stocks will under perform crude oil and the oil etf for the next several years - but Energy Juniors will outperform both.

The market is now setting up for a great entry point into junior oil Stocks!

When it comes to morbid fascination, this chart takes the Cake!


Chart 1 - Multi-Year ratio chart of Crude vs. Oil stocks

What we have here is an EXPLOSIVELY BULLISH ratio chart of West Texas Crude versus Major Oil stocks.

In technical parlance, this chart has recently broken out of a multi-year reverse Head and Shoulders pattern (or Cup & Saucer depending on your interpretation) painting a target of 0.14 at the least.

Here's why the above Chart is so Significant:


Chart 2- Dow (red) versus Oil Stocks/Crude Oil chart (blue)

Chart-2 Superimposes the above ratio against the Dow Industrials. In order to demonstrate the relationship, the ratio has been reversed to shows the Oil Stocks versus Crude (blue line).

What is imminently clear is that when Oil Stocks have underperformed against Crude Oil, the general direction of the stock market has been lower!

This in and of itself is no secret as we have all been frustrated by the lack of progress in commodity stocks versus the underlying commodities. But what is perhaps foreboding is that Chart-1 is telling us the relative underperformance is fated to go on for much longer - probably years. And by inference the Dow will remain in an extended Secular Bear Market. Confirming what we have been saying that returns on equities would be low if not negative for the next 5-10 years!

The highlight:

Now that we've painted the doom and gloom, there is some light at the end of the tunnel.

Chart-1 also shows the RSI is extended and the ratio is overbought. A pullback to the neckline (blue line) may soon begin and Oil equities will outperform Crude -- the Dow will also rebound. We are now approaching an excellent entry point into Oil equities.

Please note we do not think that Oil Stocks will show negative performance over the next 5-10 years but we do think they will lag Crude Oil itself. Superior returns can be captured through smaller energy explorers and producers that will benefit from market trends as well as company specific news such as promising drill results...this is the place to get set and the time is now!

 

Back to homepage

Leave a comment

Leave a comment