Oil rises 5% to $31.45, and the corks are popped and the market is off on a tear. Hooray! We’ve been saved!!! Really? What’s really going on?
“According to the law firm Haynes and Boone, 42 oil exploration and production companies went bankrupt in 2015. The cumulative debt of these companies was $17 billion. Another six firms have already filed for bankruptcy this year. Consulting firm Deloitte says a third of the world’s publicly traded oil companies are at a high risk of going bankrupt in 2016. The 175 companies most at risk have more than $150 billion of debt. The problem, of course, is that the world has too much oil. Oil trades for around $30 a barrel. And oil producers are falling into a parade of bankruptcies.” All emphasis mine
‘Nuff said? Folks, $30 oil is going to bring down an incredible house of cards built upon energy sector bad debt. Period. If you want to trust statements from Russia, Saudi Arabia, Iran and the rest of those cut-throat thieves, you just go right ahead. I’ll just put this out there right now. They’re not going to cut production; they won’t. Whenever the next round of supply and storage reports comes out, they’re going to say it again; there’s too much oil, and the price will fall back… again. I don’t know when those next reports will come out… I don’t even care. I’ll just watch the market. It will tell us, or the lack of faith and trust will be revived, and it will begin to slip back on its own, before the evidence is revealed.
This is, as best I am able to determine, a rally in a new Bear Market. It’s going to fake a great many people out into believing the Bull has been revived… and my guess is that the really smart are going to sell the heck out of it. I’d tell anyone concerned for their capital to seriously consider doing the same.
So, let me see. Volume was barely more than the previous 2 days, and has yet to exceed the down day volume spike of 2/11. Not much conviction there. We’re approaching its 50-day moving average. Will it slice right on thru, or get caught up in the selling of overhead resistance. The EPS line fell by another penny again today, for a total haircut of 7.1% so far in 2016. I know my data gets to me about a week and a half after it’s generated, so if Wall Street knows anything different…it’s not yet reflected in that data I view each day.
Here’s to your successful investing,
Harold F Crowell