Is this rally over?

The recent rally in the crude markets appears to be running out of steam as the price action is once again trading just below $60 in the WTI contract. The petroleum energy markets always seem to overshoot their fair pricing and this could be the set up of a good example of that possibility. 

While there have been some bullish developments in shifting supply data, global unrest and reduced rig counts in the United States, the overwhelming global supply of crude has not changed much. Consider that the major consumers like China have been using the depressed price to shore up their strategic supplies coupled with speculation that they are close to full if not already full, and you can see that once that pipeline is shut down, some rather large supplies will be left untouched. 

The rally has also borne the weight of significant hedgers returning to the market driving the price higher as consumers worry that the return to $75-or-more crude prices could nullify the recent windfall their respective business have been enjoying with the previous 50%+ declines in product costs. 

This analysis juxtaposed against a tightening price discovery could mean the highs for the year may be the beginning of a correction to the correction. A key factor that could push that car over the cliff could come today if Baker Hughes' U.S. rig count release shows any indication of rigs coming back into use following this rally.  

Yesterday's soft economic data for the United States indicted to market participants that any rate hike talk should be relegated to, at the earliest, late 2015 and more likely early 2016.  his sent the dollar lower and the indices sharply higher to all time highs, a sentiment that has continued throughout the evening session and into the U.S. market open. Confidence and manufacturing data could continue that staggering rally, though it is hard to determine exactly what the market (equity indices) would currently favor more: good economic data or bad economic data leaving easy money on the table longer. The commodities markets seem to be rending themselves from this equation to some extent at these elevated (relatively) prices. 

The natural gas report yesterday showed 111 BCF, just under the expectations and it was off to the races to test the 3.00 handle getting as high as 3.02 before leveling off. This has been an expected turn of events with the reaction from here being more difficult to ascertain. Fundamentally, not much has changed in the weather (demand) or supplies.

However, the technical reversal from the lows was a very strong indicator lending credence to the idea that this market is trading more technically than fundamentally. If that is truly the case, then the target of 3.25 to 3.30 above would make sense as the price discovery attempts to close the gap it left back in December of 2014. 

By Tory Enerson May 15, 2015

Source:http://www.futuresmag.com/2015/05/15/rally-over#.VVYJheFkpzw.twitter

Watch Long-Term Oil & 3 ‘No Brainer’ Energy Stocks

You ought to hold the oil stocks (XLE) you bought earlier this year when crude oil (USO) hit its low around $45 per barrel.

That, at least, is the advice Kelley Wright is giving to clients who think crude's 30-plus percent rally in only two months' time is too good to be true – and who therefore want to sell the oil shares they bought at lower prices. Wright is editor of the Investment Quality Trends advisory service.

Wright, insists that now is not the time to give up on good-quality oil stocks. Interestingly, though, his rationale for holding them is not that oil's price will continue to rise at anywhere near the pace it has over the past two months. Rather, he believes that a select group of oil stocks are in such strong financial shape that they represent good value and, notably, will continue to pay dividends, even if oil's price were to pull back.

To come up with his list of compelling oil stocks, Wright eliminates from consideration any that don't jump over at least five of the following six hurdles:

* Has increased its dividend at least five times over the past dozen years
* Has an S&P Quality Ranking in the "A" category
* Has at least 5 million shares outstanding
* Has at least 80 institutional investors
* Has paid dividends for at least 25 straight years
* Has produced higher earnings per share in at least seven of the past dozen years

Wright then narrows down his list even more by excluding those whose dividend yields are not at, or near, the high ends of their historical ranges. That's on the theory that the stocks with those high yields will be the most undervalued.

Which oil stocks remain after Wright applies these demanding criteria? In an email, he identified three as "no brainers."

- ConocoPhillips (COP) 
- Exxon Mobil (XOM)  
- Schlumberger (SLB)

By the way, I should stress that even though Wright believes those stocks would represent good value even if the spot crude price were to fall a bit, he is not forecasting such a pullback. On the contrary, he believes oil's average price over the next several years will be higher than it is today.

In that regard, it's worth revisiting another column I wrote, this one in mid-January, in which I pointed out that, while oil's spot price had plunged over the prior six months, a futures contract for delivery several years hence had fallen by only half as much. I quoted Campbell Harvey, a Duke University finance professor, who argued that investors should be focusing on the longer-term futures price rather than the spot market.

Harvey was right. Even as the spot price has roared 30% over the past couple of months, the long-term futures price has remained remarkably steady – quite similar to where it was in mid-January, in fact. That reinforces Harvey's argument, and puts the burden of proof on those who believe spot oil will plunge again to even lower lows.

Crude Oil Chart



Of course anything is possible, Harvey told me earlier this week, since oil's spot price often will fluctuate wildly even while the longer-term futures price remains relatively stable. But the market's best guess is that oil's price is headed higher over the longer term and, as we know all too well from everything we do in the investment arena, the market far more often than not is right.

Courtesy of marketwatch.com



Source:http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e

Wright, insists that now is not the time to give up on good-quality oil stocks. Interestingly, though, his rationale for holding them is not that oil's price will continue to rise at anywhere near the pace it has over the past two months. Rather, he believes that a select group of oil stocks are in such strong financial shape that they represent good value and, notably, will continue to pay dividends, even if oil's price were to pull back.
To come up with his list of compelling oil stocks, Wright eliminates from consideration any that don't jump over at least five of the following six hurdles:
* Has increased its dividend at least five times over the past dozen years
* Has an S&P Quality Ranking in the "A" category
* Has at least 5 million shares outstanding
* Has at least 80 institutional investors
* Has paid dividends for at least 25 straight years
* Has produced higher earnings per share in at least seven of the past dozen years
Wright then narrows down his list even more by excluding those whose dividend yields are not at, or near, the high ends of their historical ranges. That's on the theory that the stocks with those high yields will be the most undervalued.
Which oil stocks remain after Wright applies these demanding criteria? In an email, he identified three as "no brainers."
- ConocoPhillips (COP) 
- Exxon Mobil (XOM)  
- Schlumberger (SLB) 
By the way, I should stress that even though Wright believes those stocks would represent good value even if the spot crude price were to fall a bit, he is not forecasting such a pullback. On the contrary, he believes oil's average price over the next several years will be higher than it is today.
In that regard, it's worth revisiting another column I wrote, this one in mid-January, in which I pointed out that, while oil's spot price had plunged over the prior six months, a futures contract for delivery several years hence had fallen by only half as much. I quoted Campbell Harvey, a Duke University finance professor, who argued that investors should be focusing on the longer-term futures price rather than the spot market.
Harvey was right. Even as the spot price has roared 30% over the past couple of months, the long-term futures price has remained remarkably steady – quite similar to where it was in mid-January, in fact. That reinforces Harvey's argument, and puts the burden of proof on those who believe spot oil will plunge again to even lower lows.
- See more at: http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e#sthash.LZG4bE9H.dpuf

You ought to hold the oil stocks (XLE) you bought earlier this year when crude oil (USO) hit its low around $45 per barrel.
That, at least, is the advice Kelley Wright is giving to clients who think crude's 30-plus percent rally in only two months' time is too good to be true – and who therefore want to sell the oil shares they bought at lower prices. Wright is editor of the Investment Quality Trends advisory service.
- See more at: http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e#sthash.LZG4bE9H.dpuf

You ought to hold the oil stocks (XLE) you bought earlier this year when crude oil (USO) hit its low around $45 per barrel.
That, at least, is the advice Kelley Wright is giving to clients who think crude's 30-plus percent rally in only two months' time is too good to be true – and who therefore want to sell the oil shares they bought at lower prices. Wright is editor of the Investment Quality Trends advisory service.
Wright, insists that now is not the time to give up on good-quality oil stocks. Interestingly, though, his rationale for holding them is not that oil's price will continue to rise at anywhere near the pace it has over the past two months. Rather, he believes that a select group of oil stocks are in such strong financial shape that they represent good value and, notably, will continue to pay dividends, even if oil's price were to pull back.
To come up with his list of compelling oil stocks, Wright eliminates from consideration any that don't jump over at least five of the following six hurdles:
* Has increased its dividend at least five times over the past dozen years
* Has an S&P Quality Ranking in the "A" category
* Has at least 5 million shares outstanding
* Has at least 80 institutional investors
* Has paid dividends for at least 25 straight years
* Has produced higher earnings per share in at least seven of the past dozen years
Wright then narrows down his list even more by excluding those whose dividend yields are not at, or near, the high ends of their historical ranges. That's on the theory that the stocks with those high yields will be the most undervalued.
Which oil stocks remain after Wright applies these demanding criteria? In an email, he identified three as "no brainers."
- ConocoPhillips (COP) 
- Exxon Mobil (XOM)  
- Schlumberger (SLB) 
By the way, I should stress that even though Wright believes those stocks would represent good value even if the spot crude price were to fall a bit, he is not forecasting such a pullback. On the contrary, he believes oil's average price over the next several years will be higher than it is today.
In that regard, it's worth revisiting another column I wrote, this one in mid-January, in which I pointed out that, while oil's spot price had plunged over the prior six months, a futures contract for delivery several years hence had fallen by only half as much. I quoted Campbell Harvey, a Duke University finance professor, who argued that investors should be focusing on the longer-term futures price rather than the spot market.
Harvey was right. Even as the spot price has roared 30% over the past couple of months, the long-term futures price has remained remarkably steady – quite similar to where it was in mid-January, in fact. That reinforces Harvey's argument, and puts the burden of proof on those who believe spot oil will plunge again to even lower lows.
- See more at: http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e#sthash.LZG4bE9H.dpuf

You ought to hold the oil stocks (XLE) you bought earlier this year when crude oil (USO) hit its low around $45 per barrel.
That, at least, is the advice Kelley Wright is giving to clients who think crude's 30-plus percent rally in only two months' time is too good to be true – and who therefore want to sell the oil shares they bought at lower prices. Wright is editor of the Investment Quality Trends advisory service.
Wright, insists that now is not the time to give up on good-quality oil stocks. Interestingly, though, his rationale for holding them is not that oil's price will continue to rise at anywhere near the pace it has over the past two months. Rather, he believes that a select group of oil stocks are in such strong financial shape that they represent good value and, notably, will continue to pay dividends, even if oil's price were to pull back.
To come up with his list of compelling oil stocks, Wright eliminates from consideration any that don't jump over at least five of the following six hurdles:
* Has increased its dividend at least five times over the past dozen years
* Has an S&P Quality Ranking in the "A" category
* Has at least 5 million shares outstanding
* Has at least 80 institutional investors
* Has paid dividends for at least 25 straight years
* Has produced higher earnings per share in at least seven of the past dozen years
Wright then narrows down his list even more by excluding those whose dividend yields are not at, or near, the high ends of their historical ranges. That's on the theory that the stocks with those high yields will be the most undervalued.
Which oil stocks remain after Wright applies these demanding criteria? In an email, he identified three as "no brainers."
- ConocoPhillips (COP) 
- Exxon Mobil (XOM)  
- Schlumberger (SLB) 
By the way, I should stress that even though Wright believes those stocks would represent good value even if the spot crude price were to fall a bit, he is not forecasting such a pullback. On the contrary, he believes oil's average price over the next several years will be higher than it is today.
In that regard, it's worth revisiting another column I wrote, this one in mid-January, in which I pointed out that, while oil's spot price had plunged over the prior six months, a futures contract for delivery several years hence had fallen by only half as much. I quoted Campbell Harvey, a Duke University finance professor, who argued that investors should be focusing on the longer-term futures price rather than the spot market.
Harvey was right. Even as the spot price has roared 30% over the past couple of months, the long-term futures price has remained remarkably steady – quite similar to where it was in mid-January, in fact. That reinforces Harvey's argument, and puts the burden of proof on those who believe spot oil will plunge again to even lower lows.
- See more at: http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e#sthash.LZG4bE9H.dpuf

You ought to hold the oil stocks (XLE) you bought earlier this year when crude oil (USO) hit its low around $45 per barrel.
That, at least, is the advice Kelley Wright is giving to clients who think crude's 30-plus percent rally in only two months' time is too good to be true – and who therefore want to sell the oil shares they bought at lower prices. Wright is editor of the Investment Quality Trends advisory service.
Wright, insists that now is not the time to give up on good-quality oil stocks. Interestingly, though, his rationale for holding them is not that oil's price will continue to rise at anywhere near the pace it has over the past two months. Rather, he believes that a select group of oil stocks are in such strong financial shape that they represent good value and, notably, will continue to pay dividends, even if oil's price were to pull back.
To come up with his list of compelling oil stocks, Wright eliminates from consideration any that don't jump over at least five of the following six hurdles:
* Has increased its dividend at least five times over the past dozen years
* Has an S&P Quality Ranking in the "A" category
* Has at least 5 million shares outstanding
* Has at least 80 institutional investors
* Has paid dividends for at least 25 straight years
* Has produced higher earnings per share in at least seven of the past dozen years
Wright then narrows down his list even more by excluding those whose dividend yields are not at, or near, the high ends of their historical ranges. That's on the theory that the stocks with those high yields will be the most undervalued.
Which oil stocks remain after Wright applies these demanding criteria? In an email, he identified three as "no brainers."
- ConocoPhillips (COP) 
- Exxon Mobil (XOM)  
- Schlumberger (SLB) 
By the way, I should stress that even though Wright believes those stocks would represent good value even if the spot crude price were to fall a bit, he is not forecasting such a pullback. On the contrary, he believes oil's average price over the next several years will be higher than it is today.
In that regard, it's worth revisiting another column I wrote, this one in mid-January, in which I pointed out that, while oil's spot price had plunged over the prior six months, a futures contract for delivery several years hence had fallen by only half as much. I quoted Campbell Harvey, a Duke University finance professor, who argued that investors should be focusing on the longer-term futures price rather than the spot market.
Harvey was right. Even as the spot price has roared 30% over the past couple of months, the long-term futures price has remained remarkably steady – quite similar to where it was in mid-January, in fact. That reinforces Harvey's argument, and puts the burden of proof on those who believe spot oil will plunge again to even lower lows.
- See more at: http://www.bigtrends.com/etf/watch-long-term-oil-3-no-brainer-energy-stocks/?inf_contact_key=ec6ac175024dc4cacc87634b586fee90a496860cae5f2946b217acbe8fbd1d7e#sthash.LZG4bE9H.dpuf