Not a great deal of action over the last week and a bit of consolidation across many stocks which was much needed after some pretty decent rises.
Commodity prices continue to show signs of strength and despite the contrarian reaction to hefty Draws in oil supplies, the market is beginning to ‘fear’ the upside potential vs the downside. There are times to be bearish and times to be bullish. After 2 years+ of oil rebalancing acts via OPEC and the Russian’s, we might not be too far away from hitting the point whereby we start fretting about not having enough supply to meet demand. Markets used to be sophisticated but are now quite dumb. This means you get exaggerated moves in both directions. In PoO’s case, the possibility of PoO over running its true value is highly likely. A break of $60pb (brent) has not been seen since Q1 2015. Hence, it’s a long time coming and when it arrives (and I believe it will) it should test $65pb (the previous highs set in (Q1 2015). Other factors come into play which effect prices such as forex/dollar movements. The dollar is seen as weakening over the next few weeks/months which is normally a bullish indicator for crude. How long it can hold above $60pb is anyones guess (in this crazy market) but the Saudi’s look like they mean business and the Russian’s keen too.
The next big OPEC meeting is set for Nov 30th. However, it is widely expected that preliminary discussions will occur prior to the big event suggesting that a deal could be hammered out/agreed in the coming weeks. Compliance amongst OPEC is still a key piece in the jigsaw and this meeting will no doubt make that point very clear to all attending. At present, the market looks like it could handle a continuation of the current cuts to March 2018. Any mention of extending cuts beyond March 2018 could see a strong swing higher for PoO. Certainly an issue to keep an eye on if you have producing Oil companies in your folio (especially debt heavy ones). Metals look strong too which is the main reason why the miners have been so strong of late. Gold is normally the go-to precious resource when volatility and risk rises in the markets. There’s certainly plenty of concerns out there (North Korea/Iraq/Russia/Brexit/Spain/US/Iran the list goes on, yet the market (still acting dumb) doesn’t want to entertain it. It will be interesting to see what happens to Gold when the herd come rushing in should one of those potential risks become something that cannot be ignored.
The Telegraph picks looking strong but as mentioned earlier, it’s a case of much of the same for week 41.
Good progress on CERP, AMER and PANR (3 heads-up stock picks of last few weeks). All have busy news periods in Q4 which should provide the catalysts needed to keep the momentum going and share prices higher… assuming the news is good of course.
Week 1 to 41 – Current position