- With the elections just one week away, markets continue to trade mostly sideways.
- The news has switched to rising COVID numbers and earnings.
- Little changed in precious metals over the last few days, so tonight’s report will focus mostly on energy.
Overall, I continue to look for one more decline in precious metals to complete the 6-month low. The gold cycle indicator finished at 257.
-GOLD- With the election one week away, we expect increased volatility. I continue to look for one final decline to our November target.
-SILVER- Still awaiting the final plunge to our November target.
-GDX- Overall, we continue to look for one more drop into November. Prices would have a close progressively above $41.50 to support an intermediate buy signal.
-GDXJ- Prices formed a bullish engulfing candle, and we could see a brief rebound. I continue to expect one final drop towards $50.00 in November.
-XLE- One of the easiest ways to get some exposure to energy is through the XLE. It pays a decent dividend and diversifies your exposure. Prices may not rise right away, but I think energy will be much higher 5-years and 10-years from now. I do not own XLE.
EXXON MOBILE (XOM): Sentiment can’t get much worse for this company. They were delisted from the Dow back in August after 92-years. There is speculation that they will have to cut their dividend, which would remove their aristocratic status and send prices even lower. With that said, I see the potential for deep, long-term value at today’s prices.
I see a double bottom potential around $30.00 if prices drop a little further. Below $30.00, the next long-term support level appears at $25.00. Exxon is perhaps the best-run energy company on the planet. I think they will continue to leverage themselves for higher prices with exploration and mergers and acquisitions. If they maintain their dividend (currently 10.60%), this could turn into a generational buying opportunity.
Note- I started buying Exxon a couple of weeks ago in my personal portfolio. Prices are currently below my initial entry. I will continue to buy if prices drop further.
-SLB- Schlumberger is a large oil equipment service company with a respectable dividend. I see the potential for a double bottom here as well. I bought some today and will continue to buy if prices decline from here.
I think it’s important to understand that energy prices may not turn immediately higher. It could take a year or more for prices to carve out a bottom. I plan on holding these stocks for at least 5-years, probably longer.
Final Thoughts: Where will the economy be 1-year from today? Will we still be dealing with the coronavirus? Probably not. With 150 companies working on a vaccine, I’d be shocked if we didn’t have several viable solutions 12-months from now.
Trillions of dollars have been added to the global monetary system, and I think we will see a lot more. Eventually, this “easy money” will lead to inflation. When you have more money chasing fewer goods and services inflation is inevitable, in my opinion.
Crude oil is arguably the most valuable commodity on the planet. I don’t see how we can have inflation without sharply higher energy prices. By the end of this decade, I think we could see new all-time highs in crude as currencies are devalued, worldwide.
Have a great night.