Last week I wrote about some reasons why the price of oil may still be headed even higher, in spite of how many very smart people find that possibility to be preposterous. This week I have more evidence that the whole energy complex could continue its recent march higher … and that you should rarely listen to the experts.
Before I get too deep into the weeds, however, I’d like to take a minute to extend a special welcome to all the new folks that have joined us this week, to thank you for your business and to thank you for your patience as we work hard to get everyone up to speed.
As part of the TradeStops services, I currently publish two editorials a week – on Tuesdays and Fridays. On Tuesdays I write about principles of good investing and investor psychology. On Fridays I share some of my personal market views, which often extend well beyond the bounds of TradeStops.
Back to the energy complex …
The psychology of the markets never fails to amaze me.
As the price of energy and energy stocks was collapsing the past two years, there was constant talk about how energy had bottomed and couldn’t go any lower. And then it did – again and again.
Now that we’ve seen a rally in energy and energy stocks in 2016, the chatter has shifted to how energy prices can’t go any higher from here! It’s enough to drive an investor mad (and make sure that the media and advertisers get plenty of attention).
That’s why I love to tune out the noise and tune into the data.
As I mentioned last week, the price of oil is on the rise, but hasn’t yet triggered a new entry signal from our Stock State Indicator (SSI) system. Here’s an update to the chart that on OIL, the ETF that tracks the price of West Texas Intermediate Crude.
Whenever you’re looking into the energy sector, there is one big player that you can’t ignore – Exxon Mobil (XOM). In fact, XOM represents nearly 20% of the assets of XLE, the popular energy sector ETF. The table below shows the top 10 holdings of XLE and what percent of the total assets of XLE each component stock represents.
These days I do my best to stay out of the way of unstoppable forces … and I let my data lead the way,
Richard M. Smith, PhD