Market Overview: July 17th, 2008
July 17, 2008 – 3:24 pmMajor indexes posted another 200+ point session, making it two days in a row now. The bulk of this movement is due to some eased tension with the release of earnings reports. I said this when the site was first launched and the ONLY financial company I like right now is Wells Fargo(WFC), who reported a surprising report yesterday. This sent the share prices up almost 31 percent. With this in mind, do not view this as a potential bottom to financials, even with JP Morgan(JPM) releasing better than expected earnings. This is a false upward move and you will continue to get killed if you buy in now. Financials have not bottomed and will continue to decline in coming weeks.
Even though I am a fan of Well Fargo, it will still be a while before I buy into the company. Please heed some caution because you are tiptoeing into dangerous waters by doing this. For a quick play that might be of interest, integrated oil companies such as Chevron(CVX), Exxon(XOM) and British Petroleum(BP) have all taken significant hits due to global developments as well as Bush giving the go ahead to drill. The 15 dollar price drop we have seen oil is just temporary. Oil will continue to rise.
Remember, do not buy financials. You will get killed by shorters. Thanks for your time.
-Justin Moon, Senior Writer for Marketchasers.com
2 Responses to “Market Overview: July 17th, 2008”
Mr. Moon,
I strongly disagree with your thoughts regarding the current drop in oil. The nearly $150/barrel price was as high as it will get. This peak was a bubble that will burst, just like the recent housing bubble, and to a lesser degree, the .com bubble of several years ago. Perhaps in this case the air will be let out slowly rather than bursting, if you’ll forgive my use of the metaphor, but the price will certainly continue to drop. I forsee the price settling in the $95-$110 range. Not immediately of course, but after the peak summer season has ended, it will slowly continue to fall, and it would not surprise me one bit to see a price below 100 dollars a barrel by the year’s end. Decreasing demand, higher than expected reserves, along with increased offshore drilling and what appears to be a decreasing threat from Iran will all contribute. Of course, Iran may try to use their scare tactics from time to time to attempt to force up the price, but that is always temporary. In conclusion, now is not the time to buy oil service stocks, or anything in that industry. Wait at least 6 months before acting.
Cheers,
John D. Rockefeller
By John on Jul 23, 2008
Though you make some excellent points you have to look at it in a slightly broader scheme. Think about it from a global emerging market point of view, especially India and China. Oil consumption per person in these countries will continue to rise and global demand for oil will follow. I am a firm believer that these two countries are growing more rapidly than most people think. The effect on price may not be immediate and it may take some time.
By jmoon on Jul 23, 2008