Morning Market ThoughtsGood morning. The futures are showing a modestly higher open as we grind through a week known for light volume and low volatility.
In last night’s Strategy Session, we focused on retail and energy stocks because many are on the move. In the immediate environmentt makes little sense to fixate on stocks that really aren’t going anywhere. The vast majority of 2017 market leaders are drifting sideways for lack of selling pressure. With large profits in the leaders (S&P up 20%, Dow-30 up 25% for the year), why would anyone be determined to close their position out and incur a taxable gain to be paid in 4 months? While I have never allowed tax implications to influence my trading decisions, I don’t manage other people’s money. Those who do are not inclined to tick their clients off by closing positions in market leaders this close to the end of the year unless there is a darned good reason for doing so. We are in a low “darned good reason” environment.
Regarding oil, let’s take a walk down Memory Lane:
Oil prices have broken through a key level of $60/bbl — a price not seen in more than 2-1/2 years when oil was on it’s way south. After starting a slow decline that gained momentum in last 2014, oil fell to nearly $40/bbl before rebounding to $60 in early 2015, and then starting another leg down that bottomed at $26/bbl a year later. Between February and June of 2016, oil doubled in price and settled into a trading range around $50/bbl. That trading range has persisted until recently.
So with oil now breaking out of a 2.5 year base, it makes sense that many oil stocks have been working their way higher for the past several months. Further, the energy sector has the highest corporate tax rate of all S&P sectors. So the new reduction in corporate tax should continue to boost prices in this sector.
Case in point: Devon Energy ($DVN). Over the past 5 months, DVN has tacked on 50% and is now blowing out of a volatility squeeze. Several other stocks are moving in similar fashion. Be sure to watch last night’s Strategy Session, where I cover several energy stocks, including $MTDR, CLR, $EOG, $DVN, $APC, and $FANG. (Not all of these are “buy RHRN” stocks. Some are, and some are on my watch list for new entries.
I CAN HELP YOU COME IN FROM THE COLD
On January 10th, I’ll be teaching a training course on the two biggest factors in controlling risk. If you’re ready to come in from the cold, I can open the door for you. Because I want to give our members everything you need to succeed, this course will be free. It’s part of your membership. But make sure you attend. After I’ve completed the course, it will only be available for purchase in our store.
One last thing:
2017 Dumb Ass Theory Awards
We have a new nomination for the 2017 “Dumb Ass Theory” award. An outfit that calls itself “Digiconomist.net” (yes, .net) has claimed that cryptocurrency mining is on track to consume all of the energy on this planet by 2020.