Time to Take the Plunge Into Black Gold?

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The Dow Jones Industrial Average, S&P 500 and Nasdaq all made new record closing highs on Thursday. This was the first time this occurred on the same day since the end of 1999.

A strong U.S. dollar, a rally in the health care sector and a reversal in crude oil pushed investors back into risk assets and out of bonds.

Retail stocks performed well with Macy’s Inc (NYSE:M) soaring 17% and Kohl’s Corporation (NYSE:KSS) jumping 16% after the companies beat analysts’ estimates. Since over 70% of GDP is composed of retail income, the news was greeted warmly by investors, even if the results of brick-and-mortar stores are falling behind online sales.

Oil rallied 4.3% to $43.49 a barrel on comments from the Saudi oil ministers that the current oversupply of crude oil will be worked off by the end of this year. The energy sector advanced 1.3% on the news, including a 4.8% jump in Chesapeake Energy Corporation (NYSE:CHK), which announced it would pay nearly $340 million to exit the Barnett Shale in Texas.

At Thursday’s close, the Dow Jones Industrial Average rose 118 points to 18,614, the S&P 500 gained 10 points at 2,186, the Nasdaq jumped 24 points to 5,229, and the Russell 2000 added 6 points at 1,229.

The NYSE Composite’s primary exchange traded over 779 million shares with total volume of 3.4 billion. The Nasdaq crossed 1.5 billion shares. On the Big Board, advancers outpaced decliners by 1.7-to-1, and on the Nasdaq, advancers led by 1.8-to-1. Block trades on the NYSE were slightly lower than on Wednesday.

OIL Chart
Click to Enlarge

chart-key-NEW

There are many positive features on the chart of the iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL). A deep “V” appears at a crucial double-bottom at $4.88, volume has picked up with above-average accumulation, and MACD has flashed a buy signal.

However, a test of the double-bottom is needed, and there is a huge overhead of possible sellers beginning at the resistance line at $5.90, and followed by the intermediate bearish resistance line at about $5.95.

Conclusion

Despite the need for a test of OIL’s double-bottom at $4.88, it may be time to take the plunge into black gold. Many long-term investors are seeking higher yields along with growth potential. Stocks like Trade of the Day Valero Energy Corporation (NYSE:VLO) fit the bill.

Investors may have to wait a year to see oil head above $60 a barrel again, but the dividend yields on energy stocks should beat money market funds. And given the slow plodding of the major indices even as they made new highs, Thursday’s rate of advance in crude oil was staggering.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/08/daily-market-outlook-time-take-plunge-black-gold/.

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