Energy Makes a Case for Going Long

Short but sweet post. If you're wondering what is going to lead the market, look at what led during the decline. Here we can see the evidence of this:

You'd think tech (consumer discretionary is 40 percent in Amazon and Tesla) would bounce and you'd be right, but there's energy in the mix. This looks like our next bull market leader.

Earlier this week I said the second trade of this year would be short oil, but a week like this past one makes me wonder if it won't be pushed out until September. On the bright side for bears, energy's strength is bearish for tech. This definitely looks like a bear market rally. Stll, if crude has higher to go, natural gas producers such as SWN and oil services such as TDW, NCSM are a place to be.

A look at crude oil shows the Russia spike evaportated and is now almost entirely back in terms of time. Crude only traded higher on a few days and the Russia spike took it higher for only three days. If crude can touch $117 per barrel, I will view the Russia spike as an anomaly and conclude that a new breakout is underway, with a new high above the Russia spike coming. The #GreenSwan will be here. Green and ESG policies, plus lockdowns can keep pushing crude higher even as the monetary fundamentals shift. This will send the Federal Reserve to the wall on rate hikes. There will be a terminal move in crude at some point though, because the Fed's policy plus slowing money supply growth should take year-on-year growth lower.

Takeaway: the Federal Reserve cannot and will not ease policy with crude oil in a breakout. If crude rallies now, it will be a good long trade for a few months maximum. The biggest gains will probably be in stocks that have high production costs, such as offshore oil. Crude will be a great short at some point though, and I won't get too aggressive until I see how markets react to QT. If crude declines right away, it is a good short here with a good buy-the-dip opportunity coming later this year...assuming the wheels don't fall off the global economy.

Oil Services Checkup

Taco Thursday

Picked up long-term calls on Taco today.

I think it will follow in the footsteps of my two recent energy trades:

Oil Service Breakouts

The quote on NCSM is delayed; it touched $53 today.

I'm Technically Flat Now

I have been buying gold mining and energy shares, many listed below. These are small starter positions. Part of the reason for this is segregating my profits from options trading. I'm long energy as a hedge in case I'm wrong about it going down. I think stocks are done going down for a bit and look for IWM to rebound towards $209 per share as one example. The island top in Google is something I will be watching closely though...if that is a signal, it tells me the market might top out by Wednesday. I have short positions on a bunch of bond funds, TLT being the largest. Some of my positions are offsetting and the junior mining stocks are equity, not options. My VAR has collapsed after closing most options today.