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Oil tanks big time into bear market territory, markets get nervous

Written By | Jun 20, 2017
oil stocks, Chinese techs

Wile E. Coyote must have added oil stocks to his portfolio at the wrong time. (Warner Bros. cartoon image mod. by the author)

WASHINGTON, June 20, 2017 – As we had hinted in our previous column, the nice stock market rally that started the week off with a happy song got clubbed rather quickly Tuesday morning. Following Monday’s robust trading action, stocks and commodities caught the vapors in Tuesday morning Wall Street action. News that crude oil inventories continue to build sent WTI futures off over 3 percent as we close in on the noon hour.

At around 11:15 a.m. ET, WTI (West Texas Intermediate) is sitting at $42.79 bbl., down $1.41 bbl., a drop of 3.17 percent. Brent crude, the accepted international measure, is faring nearly as poorly, currently off $1.33 bbl. to stand at $45.58, a loss of approximately 2.84 percent.

Read also: Trading Diary: Stepping back from oil and commodities

Commodities in general are suffering along with crude. Gold, in particular, is getting hit again, currently off $3.00 an ounce to stand at $1,243.70 per ounce, down 0.24 percent. This is particularly disconcerting for gold bugs, as only last week, gold looked like it had finally broken through the top of its long-time trading range, often – though not always – a sign that a bullish run was imminent. Now, the gold bugs will have to go back to watchful waiting.

Stocks involved with the oil patch are predictably taking a drubbing Tuesday as well, including industries like steel that are even peripherally associated with black gold. Note to global warming climate change aficionados: Weren’t most of you warning us that we’d reached “peak oil” only a decade or so ago? So how’s that working out today? One learns to take the latest apocalyptic warnings with a grain of salt these days.

Tech is wobbly again Tuesday after attempting to shake off the doldrums yesterday. Apple (symbol: AAPL) is slipping again after enthusiastic bullish trading on Monday, as gathering shorts seem determined to bet against this tech consumer giant. We suspect Apple will have the last laugh. But no one is laughing right now.

The healthcare sector remains unusually robust, given the slow implosion of Obamacare and the inability of Republicans to get on the same page regarding their now 7-year vow to repeal and replace the healthcare Frankenstein Monster the Democrats unanimously created in the first place. Typical of today’s Washington politics, the Democrats now blame this all on the Republicans, even though they are unanimously refusing to help craft some more sensible replacement legislation.

As we (unfortunately) live in the 24/7 politics-infested Beltway region ourselves, we increasingly feel as if we’re living in another dimension. Certainly, the large portion of the populace that lives between the clueless coastal regions of the U.S. feels like D.C. and environs are in another dimension as well, which is why, smug elites, you got Donald J. Trump as president. Think about it, if indeed you have actually retained that ability.

Moving back to the stock market from the political climate – a difficult task in 2017 – we find weakness returning in general to most classes of stocks. A goodly number of perpetually maligned REITs are turning in a good performance in these markets, particularly those in the new Real Estate sector introduced by Standard & Poor’s last fall.

The new sector includes real estate holding REITs and/or REITs of this type that also service mortgages, while it excludes mortgage REITs, which still reside in S&P’s Financial sector where all REITs used to live.

Despite fears of a new housing bubble – given that at least some lenders have essentially gone back to super low down payment and/or liar loans – housing continues to look relatively robust and sustainable. so despite other areas of economic weakness in the U.S. We continue to do well in this sector. So we will stay with our holdings here even as we peel back a few other things, given our general nervousness about this summer’s market action.

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17