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What happened to the relationship between oil and the US equity markets

July 13, 2016

Today we focus on the energy sector with Chris Temple. In his recent newsletter, the National Investor, Chris outlines the issues that the oil sector continues to face. The crude oil price appears capped at just above $50 a barrel and oil companies are being pushed around by creditors to keep producing so cash continues to flow in.

We also provide some insights on why the oil price and US equity markets are no longer correlated. With oil rolling over and US markets hitting all time highs will the relationship come back and if so which direction will it be in?

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Discussion
21 Comments
    Jul 13, 2016 13:23 AM

    Chris, I did get a chuckle out of your comments yesterday.

    Particularly that you would like to add to your gold share position, because you did not purchase enough.

    That is classic bull market action.

    Markets rarely will give you what you want. Producing a bear market bias and hoping they go down, so you can load the boat, is not a good reason to purport selling.

      Jul 13, 2016 13:02 PM

      Very true — but my philosophy has always been that the very first job of an advisor/portfolio manager should be to avoid significant portfolio losses.

      Unlike virtually all gold-centric newsletters, I advised to begin selling my heaviest-ever recommended allocations in PM”s at the beginning of 2011. By the end of that year, most was gone. I’d take the avoidance of losing half a portfolio (or more) versus what others do any day 🙂 Because now, as I have advised some exposure to PM’s (along with other reccs) we are making money all along pretty much; not now merely beginning to taek some steps back to what a portfolio was worth 5 years ago, w/ LOTS of losses still to make up 🙂

      Jul 13, 2016 13:24 PM

      Dave, while we’re chuckling, aren’t you the guy that bought into Martin Armstrong’s silly claim that central banks are necessary?

    CFS
    Jul 13, 2016 13:52 AM

    The futures market has oil monotonically increasing in price until $60 by 2025.

    Contract Last Change Open High Low Previous Volume Time
    CLY00 (Cash) 46.74s +1.97 0.00 46.74 46.74 44.77 0 07/12/16
    CLQ16 (Aug ’16) 44.70 -2.10 46.58 46.71 44.69 46.80 478,633 11:38
    CLU16 (Sep ’16) 45.41 -2.16 47.37 47.41 45.39 47.57 231,275 11:38
    CLV16 (Oct ’16) 46.05 -2.19 47.99 48.04 46.03 48.24 72,833 11:38
    CLX16 (Nov ’16) 46.75 -2.17 48.35 48.71 46.74 48.92 40,078 11:38
    CLZ16 (Dec ’16) 47.41 -2.16 49.19 49.33 47.35 49.57 68,086 11:38
    CLF17 (Jan ’17) 48.00 -2.12 49.70 49.84 47.93 50.12 10,338 11:36
    CLG17 (Feb ’17) 48.49 -2.09 49.83 50.21 48.36 50.58 6,614 11:37
    CLH17 (Mar ’17) 49.14 -1.82 50.50 50.67 48.81 50.96 15,464 11:12
    CLJ17 (Apr ’17) 49.52 -1.75 50.68 50.79 49.52 51.27 4,074 10:10
    CLK17 (May ’17) 49.58 -1.95 51.09 51.18 49.46 51.53 2,139 11:35
    CLM17 (Jun ’17) 49.78 -1.99 51.26 51.42 49.70 51.77 14,599 11:38
    CLN17 (Jul ’17) 50.05 -1.93 51.55 51.55 50.05 51.98 1,880 11:38
    CLQ17 (Aug ’17) 52.18s +1.67 0.00 52.18 52.18 50.51 1,645 07/12/16
    CLU17 (Sep ’17) 52.40s +1.63 52.35 52.40 52.35 50.77 4,548 07/12/16
    CLV17 (Oct ’17) 52.63s +1.60 52.60 52.63 52.60 51.03 440 07/12/16
    CLX17 (Nov ’17) 52.88s +1.56 0.00 52.88 52.88 51.32 345 07/12/16
    CLZ17 (Dec ’17) 51.31 -1.83 52.90 52.91 51.20 53.14 20,288 11:38
    CLF18 (Jan ’18) 51.81 -1.49 52.81 52.81 51.81 53.30 174 09:49
    CLG18 (Feb ’18) 52.76 -0.69 52.76 52.76 52.76 53.45 89 07:25
    CLH18 (Mar ’18) 53.59s +1.43 0.00 53.59 53.59 52.16 67 07/12/16
    CLJ18 (Apr ’18) 53.74s +1.40 0.00 53.74 53.74 52.34 4 07/12/16
    CLK18 (May ’18) 53.89s +1.36 0.00 53.89 53.89 52.53 0 07/12/16
    CLM18 (Jun ’18) 53.58 -0.46 53.86 53.86 53.03 54.04 2,095 09:30
    CLN18 (Jul ’18) 54.16s +1.28 0.00 54.16 54.16 52.88 4 07/12/16
    CLQ18 (Aug ’18) 54.29s +1.24 0.00 54.29 54.29 53.05 0 07/12/16
    CLU18 (Sep ’18) 54.43s +1.20 0.00 54.43 54.43 53.23 22 07/12/16
    CLV18 (Oct ’18) 54.58s +1.16 0.00 54.58 54.58 53.42 0 07/12/16
    CLX18 (Nov ’18) 54.75s +1.13 0.00 54.75 54.75 53.62 1 07/12/16
    CLZ18 (Dec ’18) 53.37 -1.54 54.13 Etc……

    CFS
    Jul 13, 2016 13:58 AM

    The play today is Palladium.

    I just don’t yet understand why.

    ( $24 since 00:00 GMT)

      Jul 13, 2016 13:19 AM

      It’s still playing catch up with Platinum and Silver. It was way over sold.

      The PGM miners are not sharing the enthusiasm though…. That’s odd.

        Jul 13, 2016 13:03 PM

        Going higher……jmo

          Jul 13, 2016 13:58 PM

          That works for me. I’m still amazed at the discount Platinum is trading at relative to Gold and feel that ratio will continue to narrow.

            Jul 13, 2016 13:00 PM

            CFS is correct that Palladium was the big mover the last few days, and as Platinum catches up to Gold and is inspired by Silver’s move, then Palladium will be catching up to Platinum. Basically, all these got so oversold that the PGMs got unfairly punished and will continue to make good strides over the next few years.

    CFS
    Jul 13, 2016 13:59 AM

    That was up $24

    CFS
    Jul 13, 2016 13:04 AM

    The premium on gold between the COMEX and the SGE has almost disappeared.

    COMEX $ 1343.06, SGE $ 1343.13

      Jul 13, 2016 13:34 PM

      Comex giving in….The jig is up..

    Jul 13, 2016 13:17 AM

    Here is an interesting article that is long, but worth the read. I don’t agree with all of it, but the author raises some good questions, and points out how clueless some of the main stream investors have become following yield at all costs but ignoring the market risks. They concluded Gold is behaving like cash as a store of value (imagine that?)
    _______________________________________________________________________

    Investment Because You Have To? Sell Stocks, Bonds, & Cash, Buy Gold
    Jul. 12, 2016 – Elazar Advisors, LLC

    http://seekingalpha.com/article/3987943-investment-sell-stocks-bonds-and-cash-buy-gold?auth_param=c9otd:1boaldo:3050afd9f37525d29fa9a2c07be967b5&uprof=45

      CFS
      Jul 13, 2016 13:37 AM

      If I ever see anyone mention GLD I immediately assume they know less than I do!

      Most of the stuuff on seekingalpha is self-promotional.
      I have enough problems with HFT front-running me without having a promoter do it.

        Jul 13, 2016 13:51 AM

        Well, I don’t assume that people know less than me if they mention GLD, but I get your point. GLD is how the main stream investors buy gold (as they rarely take delivery) and likely don’t know about the Sprott or Merk vehicles.

        As for Seeking Alpha, I get tons of emails from different contributors every day, and I was cleaning out my email box and just happened to read that editorial because the title caught my attention. I thought it raised some interesting points around Goldman Sucks policy about buying the “least bad” asset, and figured I just post it in case anyone else enjoyed it.

        CFS – I’ll work on finding smarter authors who don’t bring up GLD moving forward 😉

          Jul 13, 2016 13:57 AM

          Did you like their dismantling of – TINA (There Is No Alternative)?

          CFS
          Jul 13, 2016 13:34 PM

          That’s OK.
          I read a lot of pages each day just to seek information. I prefer something posted, to not posted.
          I actually prefer CEF. To anything traded like GLD, at the start of a BULL market, because one then one can also gain via premium increase as well. But I have a maximum of physical now anyway.

            Jul 13, 2016 13:35 PM

            Agreed. Well I may still post a few articles then just for the purpose of information seeking.

            Yes, there are a few better options than GLD for trading, but it is the most liquid. Honestly, I only trade the miners and don’t see the value in trading electronic gold.

            Jul 13, 2016 13:36 PM

            Physical gold for storage. Electronic mining shares for trading and leverage on the metals.

    Jul 13, 2016 13:53 AM

    Woe is me Bernie gave a lukewarm blessing to hillary. A lot of people are going to vote for green or libertarian party candidate instead . I am too. Still making money with pipeline companys . Have a new small cap whisky company stock doing well . Aged liquor is in and a strong fad now. besto to you all S

    Jul 13, 2016 13:57 AM

    I had been in a 33% position on BP and Shell before the vote but should have just gone to 100% cash. Before the open on the monday at 8:05 am I went to 100% as they had both dropped $5 and I was not waiting for the institutions to start buying at the open and they did go crazy as these rallied hard that day by around almost $2.50 but dropped back the next day but then went on to rally hard to higher levels than pre-brexit.