Enough of the Blues

Long-time readers and Members will recall two years ago, almost to the day, that we discussed the deeply out-of-favor energy stocks in a favorable light. 

Many folks were completely dismissive of the group at that point since they had belly lagged the explosive rally off the March 2020 lows. And it was widely accepted that fossil fuels were about to go the way of the horse and buggy. 

However, we as noted in videos and blog posts then, there were indeed signs of "apathy" from market players as the energy ETFs and visible names like XOM retested their prior March 2020 lows. There was no more fear or panic since those longs had been liquidated already. Instead, all of those deep values staring at everyone in plain sight was ignored. This is textbook apathy, and is very often the absolute final phase of a protracted bear market. 

And what folks often forget is that energy stocks had been in their own nasty bear market since 2014. 

Hence, the energy bear came to an end. And now we have a new energy bull underway which is often blurred by the ongoing bear market in equities. As I have written before, the two will alternate like a "Tag team" in the old WWF days. When stocks crater, energy stocks probably shake out too. When the bear market in equities bottoms or merely take a break, energy stocks should need fresh multi-year highs. 

With Fed mouthpiece and WSJ reporter Nick Timiraos leaking this morning that The Fed may be close to a pause after the coming FOMC in November, stocks may very well have their excuse for a year-end rally. Rates need to stop spiking, as does the Dollar. 

But if that happens, oil and also gold should be in the sweet spot.

In the 1970s, for example, gold and energy stocks were the very best performing asset classes as Fed Chairs waffled between fighting inflation versus easing off the gas pedal out of fear of calamity from over tightening. 

And with gold, below on its GLD ETF daily chart, retesting its September lows to virtually no fanfare I see similar apathy that I saw with energy stocks two years ago.

Consider this: With multiple major central banks in developed economies hiking rates while also enacted QE programs, the value of gold as a safe have asset with intrinsic value pre-dating Ancient Egypt only improves.

As easily as it is to laugh off that last statement, recall the same laughs at oil stocks in October 2020...