They Kept You Up All Night; Now It's Time to Take a Ride

It may seem bizarre that oil prices and stocks are surging amid European countries locking back down amid fears of a new strain of the virus. Indeed, there are quite a few market players and pundits alike who seriously doubt the sustainability of today's rally in the energy complex and indeed most commodities. 

But when we see that sort of price action, it should drive home the point that larger forces are very likely to be in play.

Specifically, oil stocks have mostly been in long-term bear markets for, give or, take, 5-10 years now depending on which chart you are observing. The deflationary aspects of the lockdowns, by now, have probably been priced and and the market is likely looking forward at the inflationary ramifications of global growth and, of course, monetary policies in many parts of the developed world. And then there is plain-old Wall Street value seeking, something which has been rendered obsolete by many in this new paradigm, or so it seems. 

With so many doubting today's rally, likely a function of those longs being burned for years on end trying to declare the bottom to many of the energy names, I suspect it will only add fuel to the upside fire. Even if this move turns out, in due time, to be an inflationary head-fake like we saw in early/mid-2008, it can still last a few months at least. 

Thus, the energy and materials complex, including steels, ags, alternative energy sources like solars, uranium, and industrials related to the energy space, as well as coals, and even royalty trust yielding 7% like PBT (below on the monthly and then daily chart, respectively, to give perspective on the last decade of bearish action versus recent bullish action) are all in play as viable outperfomers in early 2021. 

These stocks kept investors up all night worried for years on end. But now it is time to wake up and take a ride.