West Texas Intermediate is trading at $92.21 Friday, up $1.86 since Thursday. Winter is here and it is cold. Speculation abounds on Putin’s invasion intentions. As noted last week, Germany shut down its nuclear and coal generating capacity and now must rely on outside, read Russian, sources. Last week we mentioned a $94 target but It is hard to see it stopping right there with the momentum behind it.
Natural gas prices got ahead of themselves soaring from $3.50 to $5.00 this past Wednesday. Price corrected almost 10% Thursday and traded Friday at $4.77. The trend is still up in that market as well. Our recommendation on UNG has run from $12 to $19 retreating to $17.24 Thursday.
Those prices have moved energy shares sharply higher. Prudhoe Bay Trust has moved from $3.00 to $9.00 in the last 45 days. Nustar pipelines have gained from $13.75 to $17.48 in the same period.
After going negative in 2021, crude prices may well hit $100 this month. Natural gas is in short supply world-wide and may continue its strong performance.
That is not the case for the previous Wall Street darlings, the tech stocks. PayPal peaked in September at $290. A gap drop this week has taken it to $124.30. Netflix peaked at $700 in November and now trades at $405.60. Facebook lost one-fourth of its value this week dropping from $320 to $237. That drop cost FB $175 billion of its total value. That means the collective owners of the stock lost that much ‘wealth’ as well. I call such declines in a bear market the black hole of Wall Street. Paper wealth vanishes even faster than it was created. Even Amazon has dropped from its November high around $3,700 to $2,776.
My view is that stock indexes peaked last November. Today only 16% of the NASD stocks trade over their 50 day moving average. That left the handful of FANG stocks holding up the average. With breadth vanishing, it was only a short wait for drops detailed above.
The DJIA would need a close over 35,680 to turn its intra-month trend up. A weekly close under $34,980 would turn it down. Now trading at 34,776 the market is in wait and see mode. Will the January low at 33,250 hold?
Social mood continues to trend to the negative. Shootings and murder rates soar in our large cities. Criminals are let loose on new no-bail rules. There is no Southern border. If the stock market drops illustrated here continue into November, look for a change in the House and Senate majorities.
