• 1 hour Tech Billionaire Takes Aim At Google
  • 3 hours Chinese Police Bust Largest Ever Illicit Crypto Mining Operation
  • 6 hours Expect A Pullback Before Gold's Next Major Rally
  • 8 hours Why Interest On Gold Matters
  • 1 day Ten Extravagant Food Items For The Wealthy Only
  • 1 day Why Saudi Arabia Won't Give Up On The Aramco IPO
  • 2 days $32 Million Crypto Heist Halts Tokyo Exchange
  • 2 days Is A Gold Selloff Looming?
  • 3 days Central Banks Are Stashing Gold And Dumping Treasuries
  • 3 days Three Cannabis Trends Flying Under Investors’ Radars
  • 4 days $1.3 Billion In Cocaine Found On JPMorgan Vessel
  • 4 days Amazon Teams Up With Lady Gaga To Win Over Generation Z
  • 4 days Dollar Falls As Powell Teases Rate Cuts
  • 4 days Will The World's First Trillion Dollar Company Ever Bounce Back?
  • 5 days Many Americans Will Never Stop Working
  • 5 days Mozilla vs DarkMatter: The Cyber Espionage End Game
  • 5 days Chile Cracks Down On Environmental Infractions
  • 5 days Warning Signs Emerge For Boeing
  • 6 days First Amendment Stands Strong In Trump vs. Twitter Showdown
  • 6 days Musk Bullish On Tesla Despite Executive Exodus
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

When Will They Bottom? Oil, SP500, then Exxon Mobil

A full blown bear market in energy resources and energy stocks has been underway since mid-2014. History shows that the price of crude oil typically bottoms before the broad stock market. And oil related stocks bottom at the same time or later than the broad market.

The monthly chart below shows how oil bottoms several months before the stock market does. This provides us with some insight on when we should start to expect a bear market to end in the US stock market.

Many traders follow and trade shares of Exxon Mobil. And while the are big money maker I do feel their share price is going to underperform oil for some time. Based on my research XOM has acquired many new oil operations, which many require $70+ per barrel to be profitable. This has cost XOM a considerable amount of capital and is now left holding and operating business that are losing money with the current price of oil sub $40 per barrel.

Light Crude oil Monthly Chart

Base on my analysis, economic data and forecast I feel as though oil will remain low for another 3-9 months below $60 per barrel. It will do this for several reasons but what matter to us is that it forced the majority of oil producers to cap and close off well and go out of business. While this is taking place stocks and the economy will rebalance through a strong economic recession and a bear market in equities that will last most if not longer than 2016.

Take a look at the US stock market average (SP500 index) in the chart below. While this chart is a very basic and simple looking forecast understand that the stock market internals and market breadth have completely collapsed just s we saw in 2000 and again in 2008 months before the index collapsed and started bear markets.

S&P500 Monthly Chart


Oil, XOM, and Stock Trading Conclusion:

In short, I expect oil to find a bottom during the next 1-3 months. Oil services stocks on average are likely to trade sideways and build a basing pattern. These oil services stocks will not breakout and rally until the broad stock market has bottomed which I expect to happen late in 2016 or early 2017.

Unfortunately, oil and oil stocks collapsed so fast without any retest or pause for us to get short and enjoy the ride down for profits. I feel trading oil and oil stocks will be choppy and tough in the near year. Last week subscribers and I played the energy (XLE) for a quick two-day pop of 2-4% return depending on entry and exit. These types of plays will continue, but the big trend trade in oil and energy are a long way away yet.

 


The easier money will be likely be shorting the stock market (buying inverse ETFs) to profit as stocks collapse which is what I provide subscribers to my ETF trade alert newsletter: www.TheGoldAndOilGuy.com

 

Back to homepage

Leave a comment

Leave a comment