The week was positive mostly for oil prices. Holding to my positions paid off. I have not decided what steps to take next but in the long run, I am still bullish on oil.
EIA ( Energy Information Administration) anticipates rising oil production the next year, however, it was below the expectation. Oil prices moved higher during the week as oil inventories were down. It has been a month since the range of oil prices has fallen to 47 -41 $ range for WTI from 52-47 $ for the May – June. The long-term trend is down so far. Oil will keep its range for 40 -55 $ for the foreseeable future. It’s a wide gap but as prices currently are moving to my predicted range, it gives me a conviction to hold on to my position for now.
To move the prices above 55$ we will need first, either non-stop falling US oil production or rig count which is unlikely as US companies are developing their technologies, tools to find cost effective production methods, second, major political turmoil in Gulf Nations which has less chance of occurring. Qatar situation is right now the political crisis, however, it will unlikely reduce production which stands around 600K bbl/d and does not make much impact either. Another major impact might come from Venezuela rather than the Middle East which produces around 2.2 mbbl/day and the production has been in a decline since 2014 due to lower oil prices which have triggered less investment in drilling. But to move the markets, abrupt production cut is required and right now, I don’t see it anywhere.
Gold will start its next bullish move in the coming weeks based on technical indicators but I am not so sure to take the trade or not.
US stocks are in the bubble but investors still ride on the tide. So, far, I don’t see any major catastrophic event that is on the horizon that can take markets belly up. Corrections are realistic but nothing to cause a mayhem in the market. Furthermore, Trump policies are having the positive effect on the market. Despite postponing tax bill, Trump protectionism is underway. Low unemployment (best in 16 years), lower rates keep the economy going forward. Banks are in better shape than a pre-crisis period. Despite the view that markets can tumble due to FED’s rate policy and tapering, I don’t think it will immediately. Corporate America will reduce its financing, hence share buybacks will decline and we may not see rising stock market as fast as the previous years.
On the other hand, It is becoming harder to find value stocks in the market. Information technology, Financial services, healthcare are doing fine this year and I believe certain technology companies will keep outperforming the market as the world become more digitalized at a faster pace. I don’t see any reason for that trend to stop on information technology sector anytime soon, unless, the whole market cracks.
So far, I am up 11.77% YTD and 11.3% since the inception of the portfolio. The gains are mostly due to trading on commodities -oil and gold which are one of the most speculative ones in the market. I am working on restraining myself from trading those and shifting my focus to stocks gradually. It takes time to analyze stocks.