The Nasdaq100 is already down 4.5% this month. Technology as a sector is down almost 6.5% for August.
But corrections are a choice, not a requirement.
As an investor, you make the choice and decide which assets you want to own and which you do not.
Remember, "Passive Investing" is a lie. There's no such thing. All investors are active. The difference is whether you choose your portfolio holdings, or you let some random index providers make those decisions for you.
But we're all active investors, whether we like it or not. Don't forget that.
So even thought the indexes are messy this quarter, take a look at Energy hitting new 6-month highs this week:
Crude oil and gasoline futures are completing major reversal patterns.
Heating oil is ripping higher.
Natty gas has traders on the edge of their seats (what’s new?) as it heads into a seasonally favorable stretch.
But what about the rest of the commodity space?
Check out the overlay chart of our equal-weight energy index and our equal-weight broad commodity index:
Both averages have followed the same path since the 2020 lows despite a mere 15% weighting toward energy in our broad commodity index.
But energy is pulling away. Oil and gas names are taking on a leadership role among US equities as their underlying commodities confirm by digging in and resolving higher.
Remember in the back half of last year, when virtually everything was working EXCEPT for Tech stocks?
Well a funny thing happened early in 2023, money rotated into Tech and other Large-cap Growth.
These Tech stocks did so well, that people who are bad at math convinced themselves, and others around them, that it was only 5 or 7 stocks going up.
That was hilarious.
And while it definitely wasn't just 7 stocks, but thousands of stocks ripping in your face all year, Technology was certainly the leader along the way, particularly on a market-cap weighted basis.
But that relative strength has been rolling over the past few months as momentum has also diverged negatively.
Energy commodities are reclaiming critical levels. They’re outperforming their alternatives. And buyers continue to support a healthy demand for crude oil distillates.
What’s not to like?
Today, I’m drilling down to individual stocks, highlighting five trade setups I didn’t cover in last Wednesday’s What the FICC episode…
And these stocks look ready to rip!
First up is oil services. I like this group of stocks because the oil services ETFs $OIH and $XES are the strongest among industry groups.
Most energy stocks and commodities have failed to provide the best opportunities for the average market participant.
In fact, they’ve been an absolute dumpster fire compared to high-flying tech names for almost a decade.
But everything changed following the 2020 sell-off.
Commodities flipped the script, outperforming bonds and stocks. Long-forgotten energy names worked their way back in the conversation as the energy sector taught a masterclass in relative strength.
This story isn’t finished – not yet!
One glance at the market’s year-to-date performance reveals an explosive tech rally that’s managed to erase the past two years from our collective memory.
