Today, I am going to post some charts for WTIC oil, Natural gas, gasoline, and finally, energy producers. These charts will offer guidelines as to why, despite the drawdown of energy of late, I am convinced that the sector will be ripe to move back up within a short period of time. I have presented a fundamental argument for owning energy producers in a blog called “Opportunity” here. you should read it if you want to know the fuller argument for buying back into the sector. To a lesser extent, I noted that Buffett is buying the sector here in my last blog. Also- it should be noted that we at ValueTrend moved from a 30% weighting in the sector early this year to a 7% position as of this time. But, to paraphrase Arnold Schwarzenegger, “We’ll be back”
Crude Oil /WTIC
The chart below demonstrates the current sideways consolidation within a general uptrend (no break of the 40 week/200 day SMA). Until a break of support AND a break of the SMA occurs, its not a bearish chart. Full stop.
The chart below tells us that the price of Nat Gas went parabolic. It retreated – as it should have – and it bounced off the SMA. It has not violated its 200 day / 40 week SMA, In fact, that bounce confirmed the trend as supported. Its a rough and rocky uptrend. But the show is far from over at this point.
A nice bounce off of support AND the market is holding the 40 week SMA. So far, so good.
Lets use the iShares Capped Energy Index ETF for illustration of the group. My uptrend arrow covers the 200 day SMA. But you can take my word for it that the sector remains on trend from both a peak/trough trend perspective AND from its support of the SMA.
Here is the bottom line with each one of these charts: They are down a bit, but they are healthy. Sure, they could break down, but I do not predict that as a likely potential. So, for those of you who didn’t sell when I was talking about reducing your positions a few months ago -don’t worry. Be happy (Bob Marley!). The trend remains your friend until it ends. And it has not seen its end just yet.
A quick rant on why Canadian gas consumers get the short end of the stick
This next part of the blog is a bit of a rant. I get a lot of positive feedback on my rants- and we have more than 4000 regular readers of the blog. But… the few remaining Trudeau supporters won’t like this. I’ll delete your emails and won’t post your comments. So the three of you–give this section a miss. For the rest of you, here is my take on the Canadian vs. US gas price situation. Sometimes, just gotta get stuff off my chest.
Current pricing on gasoline in the USA is $4.52/ gallon according the the American Automobile Association daily pricing survey. Different states have different pricing, just as Canadian provinces do. We’re talking averages here. A US gallon is 3.78 liters, which brings this to an equivalent of $1.19 USD/ liter. That’s $1.54/ liter Canadian dollars at todays exchange rate.
Meanwhile, the Canadian Automobile Association daily survey shows $1.77 is the average price for Canadians. So, where does the 15% ($0.23) higher price of Canadian gas at the pump com from? Obviously – taxes. Canadians pay additional taxes of approx. 11 cents / liter in the hated carbon tax. PLUS an additional $0.12 in standard gasoline taxes (varies by Province). This is all over and above what our American counterparts pay. The Canadian Taxpayers Association did some math. The claim that carbon tax rebates will offset the costs, propagated by the current government in Canada, is bogus. The Liberals are using “magic math” to deceive the public, they say. No surprise.
Trudeau, who admits he cannot do basic math, obviously hadn’t looked at the numbers. I’m sure he wouldn’t understand the math if he did. Premier Jason Kenny of Alberta, home of Canada’s oil patch, also had this to say about Trudeau’s intellectual challenges. As an aside…Who votes for a person to become responsible for the economic policies of a G7 nation, when he cannot calculate 13 + 14 (Trudeau’s own example)? Anyhow- I’d have to assume some of his people can do math, and knew very well that the carbon tax will cost Canadians more, rebates or not.
Moreover, inflation’s prime driver is…you guessed it… gasoline. And yet, they implemented the carbon tax on top of our already vastly more taxed (vs. the USA) gas.
This – right at the time of the current energy crisis. Heartless, and uncalled for at a time of extreme stress to most Canadians (except the political elite) during the current rampant inflation.
I hope he does call an election this fall (so go the rumors). This needs to stop.
Jamil Jivani: Trudeau has damaged the Liberal party’s commitment to free speech | National Post
umm, check your math? Shouldn’t the difference between US gas and CA gas be $0.23/liter?
“A US gallon is 3.78 liters, which brings this to an equivalent of $1.19 USD/ liter. That’s $1.54/ liter Canadian dollars at todays exchange rate. Meanwhile, the Canadian Automobile Association daily survey shows $1.77 is the average price for Canadians. So, where does the 29% ($0.35) higher price of Canadian gas at the pump com from?”
Totally correct –its $0.23. Realized this right after I had published. Anyhow–corrected! Ironic…feeling sheepish over that one!
Do you think XEG will follow its seasonality pattern this summer?
Looks like it is–that is, for a flat/soft period over the summer and early winter, followed by a pop in the new year. That makes sense to me, given the neartermed recessionary effects etc. As I noted, it all will come through on the charts
In BC the Provincial Govt administers the carbon tax (which was implemented in 2007 – long before the Feds thought about it….although Steven Harper proposed one around that time) and uses the revenue locally for things such as incentives for electric vehicles, natural gas conversions from gas/diesel, heat pump installations, charging stations and so on.
In the Metro area of Vancouver a local fuel tax (again not the Feds) is collected which is used to enhance roads, bridges, transit, bus lanes, bike paths and the like in the area. (No toll roads, bridges etc here…..you can keep those in Ontario please,)
As a side note, the last carbon tax increase this spring raised the tax on a litre of gas by an outlandish 1 cent. With the price of fuel more than doubling in the last year anyone complaining about this huge tax increase needs to do some basic math….perhaps at the same remedial class that Trudeau needs to attend.
The spring tax was 1 cent but total carbon tax remains near 11 cents. While provinces (some of them) are trying to lower tax burden on gas, Fed’s raised it. Point is–we are paying more here and right now, we are in need of a cut, not a raise in pricing to help ordinary people deal with inflationary pressures.
Love your rant. Please keep it going.
Hi Keith, in your “Opportunity” blog, June 30/22, you mentioned that “We might even attempt a trade from the oversold conditions in a month or so”, aside from a restart of the money printing machine, what other catalysts would you be on the lookout for to enter into the trade early? Would you attempt anything in advance of next weeks Fed meeting?
I was referring to trying to play the oversold potential for a neartermed rally that now appears to be happening. Having said that, we took a minor position in a SPX ETF to try to trade it, sold it when it failed twice to break 3900 resistance (although now it has…albeit to a minor level) and have just sat on the sideline since. I am not convinced that its time to deploy cash. But, that can change.
As far as entering the market for a bigger picture, the bear is not over until I get a Bear-o-meter “all clear” rating, AND (more importantly) a move over roughly 4170 prior peak within the current downtrend. Anything below 4170 is a rally, not a new break in the bear. Especially because we don’t have total capitulation yet.