Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Archive for the ‘oil stocks’ Category

Gold and Oil: Staying the Course

By for Profit Confidential

Terrible day for the markets yesterday…

It all started with June crude oil futures down about $9.00 a barrel, the U.S. dollar up sharply and the precious metals down. June gold futures were down about $34.00 an ounce, bringing the metal back below the $1,500 level. There was more pressure on silver prices, too.

Precious Metals Investments: How They’re Affected by the Middle Eastern Unrest and Devastation in Japan

By for Profit Confidential

Libya is getting bombed by American, British, and French fighter jets. The situation in Libya could spill over to other Arab countries in sympathy.

Japan just suffered a horrific tsunami and related leak in one of its nuclear generation plants. The damage could impact the country’s economic renewal.

In all of this, after declining to just north of $1,300 an ounce, gold has been rallying. It is trading at a key level of $1,430 on the chart.

Run on Oil & Gold Just Getting Started—Time to Get Real

By for Profit Confidential

Institutional investors will still be buyers of equities as the market pulls back. There’s just no other way to earn a decent return on investment that beats the rate of inflation. Any consolidation or correction in stock prices would certainly be a positive development for the long-run health of the equity market. The stock market needs a rest from its excellent performance over the last two years.

Gold, Silver & Oil Stocks Doing Great, but Dow Jones Transportation Average Starting to Wobble

By for Profit Confidential

There is virtual glee in the resource sector these days. Precious metal prices are trading near records. Oil prices are going up. The only commodity that’s holding back what might be argued as the entire resource sector is natural gas. That means it’s a good time to start looking in this area for some attractive investment opportunities.

Oil Stocks: Why They Say $100.00-
a-Barrel Oil Is a Reality

By for Profit Confidential

Long-time subscribers know my fondness for stock price charts in determining future trends. I believe, most of the time, that the price of stocks are a leading indicator of what lies ahead, especially for individual stock sectors.

The Future of Oil Sands

By for Profit Confidential

The reputation, if it could be called so, of oils sands has been more about exorbitant costs and a dirty carbon footprint than about being a vast source of fossil fuel and associated profits. It seems that researchers have found a way to resurrect oil sands and, by association, oil companies with such properties in their portfolios. Granted, although the “new” future for oil sands has been long in the making, it has not yet reached critical mass. Still, it appears a viable vision and one worth presenting to our readers.

The vision involves underground, slow burning, oxygen-fuelled fires forced upon a mixture of oil, water and sand at a toasty 500-600 degrees Celsius. As counterintuitive as it sounds, these underground fires, notwithstanding the invoked images of hell, could be the cheapest way out of the conundrum that the meaningful and economically viable exploitation of oils sands represents.

I was curious about these fires burning the oil sands to produce crude oil. In the lab environment, huge test tubes are used to recreate the closest possible analogue to the oil sands of northeastern Alberta. Fuelled by air, these slow-burning fires slowly move down the tube, but burning only about 10% of oil, yet creating enough heat and pressure to free most of the crude trapped in the sand without using dangerous chemicals, loads of water, vast amounts of natural gas, or ugly open pits. The only thing needed is air that is forced into the oil sands at high pressure.

Such a virtually negligible environmental footprint that this new technology of exploiting oil sands would leave behind represents a dramatic … Read More

Where’s the Market Heading?

By for Profit Confidential

Stocks are attracting some buying at this time, but I expect to continue to see some selling pressure should markets move higher. This is because the risk continues to be high, so there is little incentive.

The decline in oil is helping stocks, but there is still a sense that the upside may be limited in the near term.

A technical indicator I like to look at is the volatility readings from the CBOE.

The CBOE NASDAQ Volatility Index or VXN — a barometer of near-term market volatility based on NASDAQ 100 index option prices — is generally viewed as a contrarian indicator. A high VXN indicates maximum fear and a possible market bottom. A low VXN indicates reduced apprehension and a possible market top.

The five-day VXN to August 13 fell to 24.41 from 26.19 the previous week. The VXN readings have been declining in recent weeks, which indicates a potential near-term top on the NASDAQ.

We are also seeing the same type of readings in the CBOE Volatility Index or VIX, a barometer of near-term market volatility based on the S&P 500 index option prices. The five-day VIX to August 13 fell to 20.67 from 22.27 the previous week. The recent trend of lower VIX readings could indicate a near-term top.

These technical readings are meant only to help analyze the condition of the market, but they are pretty good as far as giving us reliable readings of direction.

Over the next few weeks, watch to see if stocks can break higher. The NASDAQ has broken above its 200-day moving average and is showing a bullish double bottom, … Read More

The Oil Demand/Price Yo-Yo

By for Profit Confidential

The high price of oil and gasoline is clearly making consumers drive less often. According to a weekly survey by MasterCard Incorporated (NYSE/MA), the demand for gasoline in the U.S. Has declined for 13 straight weeks, including a 3.3% decline in the latest week. The movement of gasoline prices shows that there is high price elasticity between demand and price. When prices rise, demand falls, and vice versa — when prices fall, demand rises. I know that, in my own case, I try to drive less.

The decline in gasoline demand is driving up oil supplies. This has seen oil retrench below $130.00 a barrel to the current $126.00 level for the light sweet crude for September delivery on the New York Mercantile Exchange. Oil is now down about 14% from its recent peak at above $147.00 just over a week ago. The failure of $130.00 to hold could indicate more downside moves, but I do not believe a trend reversal is in place, as the fundamentals for the oil market remain strong.

Also watch for the tropical storm season. Although tropical storm Dolly is not expected to do much harm to the Gulf of Mexico refineries.

The decline in oil and gasoline could help the market in the near term, as it removes a major risk factor. Nevertheless, oil prices are still high in spite of the decline and remain a threat to economic growth and consumer spending.

The near-term technical picture for the September light sweet crude has weakened to the current relatively bearish, with declining Relative Strength that is well below neutral, indicating potential more selling in … Read More

How to Capitalize on the Energy Crunch

By for Profit Confidential

With the price of oil and natural gas so high these days, more and more homeowners are looking for alternative ways to heat and cool their homes. Residents in the Northeast have particularly felt the pain of high oil prices, because a lot of homes still heat with furnace oil, otherwise known as diesel fuel.

There are two areas of the HVAC industry that are really growing right now and these are geothermal heating and cooling, plus there is a return to wood burning. In both cases, geothermal and wood heating are particularly suited to rural environments.

Ask just about anyone burning home-heating oil and I bet you’ll find they are looking for alternatives. For rural residents, there is now a lot of interest in outdoor wood-burning boilers, pellet and biomass furnaces, and even traditional wood stoves. Wood-burning technology is now finally advancing and a lot of these appliances burn more cleanly and release a lot less particles into the air.

When it comes to ground source heating and cooling, geothermal heat pumps are the big news and business is booming. Despite high installation costs, geothermal heating and cooling use the relative constant warmth in the ground below the frost line. This heat is compressed and then distributed around your house. When it’s hot out, the reverse takes place and you’ve got air conditioning. These systems are highly efficient and all they take is electricity to operate.

One company that’s doing very well selling geothermal equipment is LSB Industries, Inc. (AMEX/LXU). This stock is under-followed and is very reasonably priced on the stock market right now.

With so much attention Read More

Automaker Market Adapting to Soaring Fuel Costs

By for Profit Confidential

The demand for small and fuel-efficient cars have been trending higher in concert with the surging oil prices, which recently traded at just over $135.00 per barrel on May 22. Oil prices are impacting the way consumers think about spending. With the average price of gas at $3.93 per gallon across the U.S. and with it being an upward trend, there is an impact on driving and what cars are in demand.

Now it costs me nearly $100.00 to fill up my SUV and, trust me, it does not last long. I see Hummers parked in driveways replaced by smaller cars.

With pundits being bullish on oil as we are and predicting oil to reach $150.00 per barrel by 2010 — although, based on the current speculative trend, it could be sooner, as it is only 11% higher from the recent high — drivers will need to make choices. Japanese automakers have realized this and have been making small fuel- efficient cars and SUVs for years. Unfortunately it has been catch- up for U.S. automakers, which had made tons of money on SUVs, but are now struggling to sell them.

The positive is that U.S. automakers are dealing with the new environment of high gasoline prices and adapting. General Motors Corporation (NYSE/GM) announced on Tuesday that it would shut down four truck and SUV plants in the U.S., Canada, and Mexico, blaming the high gasoline prices on demand. In fact, there is speculation that the Hummer may soon be axed from the line-up. Not surprising given that demand has plummeted for these gas- guzzling monsters.

GM will produce smaller cars … Read More

Alternative Heating Stocks Could See Big Profits

By for Profit Confidential

With the high price of both oil and natural gas, it’s pretty clear that a lot of people are looking for alternatives, not just for transportation but also for home heating. Even the price of firewood is going up because home heating oil (diesel fuel) is so expensive now.

A lot of homeowners are now looking at geothermal heating and cooling installations. These systems consist of a geothermal unit located in the basement of a house, which is connected to a loop of pipe that is buried in the ground below the frost line. Water circulates through the loop of pipe, absorbs the heat from the ground and takes it back into the house.

A geothermal unit transfers the heat to become hot air or hot water, and moves it around either through standard air ducts or hydronic pipes. In hot weather, the system reverses itself, as heat is taken from the air in the house and put back into the ground, providing an air-conditioned environment.

These systems burn no fuel and do not create any greenhouse gases. All they require is a minimal amount of electricity to move the water around the ground loop.

One company that’s at the forefront of the manufacture of geothermal units is LSB Industries, Inc. (AMEX/LXU). Operating through a number of subsidiaries, this company manufactures and sells some of the most efficient geothermal and water source heat pumps in the business.

The company also boasts a chemical division that manufactures and sells nitric acids, metallurgical and commercial grade anhydrous ammonia, as well as other products for the agricultural and mining industries.

In its first Read More

Oil’s Far From Done with Us

By for Profit Confidential

Market risk is rising not only due to credit and economic concerns, but also because the trend for oil and gasoline continues to move higher. The price of the light, sweet crude for May surged above $118.00 a barrel in electronic trading on the New York Mercantile Exchange on supply concerns. With this, the average price of a gallon of gasoline is now about $3.50 a gallon in the United States, while jumping to $3.84 a gallon in California, where you may soon see $4.00 a gallon this summer. Gasoline prices are high, but compared to Europe and even Canada, they are relatively low.

Again, for the consumer and those who rely on their vehicles as their only mode of transportation, the recent surge in oil and gasoline will translate into less money available for other spending. The fear is that this would drive down consumer spending, which accounts for about two-thirds of Gross Domestic Product growth in the United States.

Also watch for the impact of higher energy costs on businesses. In addition, there will also be an impact on non-profit organizations and this means the need to raise more funds. The reality is that the impact of these high oil prices will be dramatic, and I do not feel that the real impact has been fully disclosed. The near-term technical picture for the June sweet crude remains bullish as of April 22, with rising Relative Strength. Yet given the surge, the June oil is extremely overbought, so we could see some near-term selling pressure. Watch for selling pressure, as oil approaches resistance at $119.00 and overbought resistance at … Read More

Will Oil Boost or Bust Shopping Season?

By for Profit Confidential

Oil has been the hottest performing commodity, after trading near $100.00 a barrel a few weeks back. But after failing to break $100.00, oil has been on a downtrend, with traders taking some profits due to the extremely overbought condition.

On Monday, the January light, sweet crude was trading below $90.00 at $87.70 on the New York Mercantile Exchange, the lowest level since October 25. Driving down prices is speculation that the Organization of Petroleum Exporting Countries (OPEC) may increase its daily production quota on Wednesday in an effort to bring prices down a bit. OPEC has indicated that it may increase production. Analysts estimate that the increase could range from 500,000 to one million barrels a day.

On the chart, there is a bearish double top that formed after failing to break above $100.00. The neckline is around $87.50 or around the current level. A break below could signal further weakness ahead in the upcoming sessions.

The near-term technical picture for the January oil is moderately bearish, while the Relative Strength has been on the decline and is now relatively weak, which points to potential near-term selling pressure. The January oil is trading below its 20-day moving average (MA) of $93.81, but is holding around its 50-day MA at $88.55. Weakness could drive the January oil down to the 100-day MA at $80.55.

For the economy, the lower oil prices are positive, as high oil prices translate into higher corporate costs and impact earnings. For the consumer, high oil prices mean higher gasoline prices. People could drive less and make fewer trips to the malls, which in turn, impacts … Read More

December Oil Looking Bullish

By for Profit Confidential

Oil is one hot commodity these days, as I’ve said in previous commentaries. The trend is bullish and continues to trend higher in spite of overbought conditions. Once a strong trend is in place, it is difficult to trade against it. Dow Theory states that a trend stays in place until it is broken. The trend is heading towards $100.00 a barrel and I expect this will occur.

 On Wednesday, the December light, sweet crude surged above $98.00 a barrel to $98.62 on the New York Mercantile Exchange. The approach to the $100.00 level as suggested by Goldman Sachs, which was pushed aside as ridiculous, now appears to be in motion, with a break certainly to materialize in the near term as long as the technical strength holds and fundamentals support higher oil prices.

 The current oil market is driven by news of declining U.S. supplies, a weaker dollar, geopolitical concerns in Iran and Pakistan, and the failure of OPEC to increase production.

 The high oil prices are a real concern because of their negative impact on transportation companies, for which oil is a major part of expenses. For the economy, the high oil prices translate into higher corporate costs and impact earnings. For the consumer, high oil prices mean higher gasoline prices. People could drive less and make fewer trips to the malls, which in turn, impacts retail sales and the economy.

 The near-term technical picture for the December oil continues to be bullish at this time with strong Relative Strength, but the buying has also created an overbought condition on the chart, an indication of potential near-term selling … Read More

The Fallout From Oil Royalties: The Popular, the Principled or the Righteous?

By for Profit Confidential

When Ralph Klein took over the helm in Alberta, the province was neck-deep in debt, exhausted by the national energy program, plagued by low energy prices, and in need of some surgical and unpleasant cuts. So, former premier Klein did what he had to do — cut spending to conserve money, cut taxes to stimulate output, and invested every dime left over in setting up the royalty regime that should probably take most of the accolades for recovering the province’s oil patch.

But of course no good deed goes unpunished forever. In a fair society, fair distribution of wealth is key to keeping its basic mandates. So, when one province suddenly develops a case of Midas’ “golden touch,” it comes as no surprise that the Federal government will pay for elaborate studies, polls reports and what- have-you to find answers to a simple question — if one province fares better than the other, isn’t it fair to share the wealth?

And of course the rest of Canada will voice a resounding “yes” to that question. Particularly after alleging that not everyone is benefiting equally from the federation and that the federation is not supposed to create excess wealth on one side and meager incomes on the other.

What usually happens is that populist demands create sufficient pressures on local governments to create new laws, regardless whether such laws are justified or not. Most of the time, it is much easier just to give the people what they want, although, it has to be admitted, the popular choice could be the right one, too. But has the populist choice really been … Read More

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