The Big Picture

Energy Strategist (07/07/2010)
"Until earnings season gets underway, the market will have little concrete news flow other than a smattering of economic reports. Accordingly, the same broad macroeconomic themes and headlines that have dominated the tape since late April should continue to drive stock prices.

I've written about these big-picture themes extensively in the past few issues of The Energy Strategist and look forward to the day we can focus once again on stock- and sector-specific growth stories. At the same time, the big-picture headlines have produced some wild swings in the market; to ignore these trends would be irresponsible.

On June 8, I called for a summer rally above the S&P500 200-day moving average; within two weeks, the market pushed through that key technical level, rallying to an intraday high near 1,130. Two weeks later, the broader market sold off more than 100 points, closing below its 2010 lows. . .but should react positively if earnings reports aren't too disappointing, particularly now that expectations are lower. Any rally is unlikely to push the S&P500 beyond its June highs; I expect the broader market to remain range-bound until autumn. Over this period, investors should expect dramatic, short-term swings in both directions.

I'm more constructive on the final months of 2010. The big-picture themes that have weighed on energy-related stocks this year are double-dip recession fears, risk of a second credit crunch and fallout from the Macondo oil spill in the Gulf. . .I still hold that the chances of a double-dip recession are remote.

While the oil spill is a negative for. . .deepwater drillers; a prolonged moratorium is bullish for energy commodities; it will restrict supply even as global oil demand recovers."

 PRINT THIS PAGE   EMAIL THIS PAGE

Under SEC rules, analysts are required to disclose their interest in securities that they cover. We strongly encourage you to contact them to understand any potential conflicts of interest they may have.

Related Quotes: