In my last article, titled "Stocks Coming Back Down", I said, "...I think near-term we can look for SPX to test the 50-day MA, which is around 3970 right now."  It was August 23, 2022, and SPX closed at 4138.  In a couple of sessions, SPX took a dive and came down to its 50-day MA.  It had been bouncing above-and-below that 50-day MA.  But now, that support is broken.  Let's take a look at the SPX chart:
 

SPX

The "black circle" in the above chart points to the recent struggle around SPX's 50-day MA.  Last week, when the CPI came in hot again, and with the Fed meeting on Wednesday this week, the support at 50-day MA is now broken.  SPX is now slip-and-sliding downwards towards the low set back in June, which is at around 3650.

Truly, stocks have been very resilient.  It seems buyers jump in at every bit of good news.  With interest rates still near "zero", where are people going to put their cash?  One can hardly make any money keeping it in a savings account.  The Gen Zs are just joining the work force; they've probably never seen interest rates above 1%.  All they've seen is money in the bank shrinking with inflation, and inflation just seems keep climbing.  Are we ever going back to a more "cash friendly" environment where one can expect to get 3-5% of interest keeping money in the bank?  After the financial crises in 2008, the Fed saved the markets by dropping the rates and keeping them low.  Now, we hear fund managers jumping up-and-down blaming the Fed for raising rates and perhaps causing a recession.  But, maybe, maybe we just need to return to the norm?  With that thought in mind, how many raises must the Fed do?  Is a full-point raise coming on Wednesday this week?  How low will SPX drop?

Well, if we do get a full-point raise on Wednesday (which is more likely than most people think), I don't think SPX 3650 will hold.

So, what do we do now?  Tech stocks have already been tumbling.  Semiconductors have certainly had their share of the supply shortage problems.  Big names such as the old FANG (or now "M"ANG?) have "corrected" quite a bit.  I see one sector that is still fairly high - the energy sector.  But, who shorts the "energy" sector?  Maybe not whole energy sector all together.  Maybe the energy sector needs a major shift?

We all know that the climate change has begun, and it is changing much faster (ie. global warming is much worse) than we are willing to admit.  Big funds have already started to move into solar and other "green" energies.  For one thing, EV cars have become more popular than the old "guzzlers".  If you are buying a car right now, are you not going to check or test-drive a EV car?  Let's face it.  Oil will die, because if it does it, we will.

Therefore, one of my new "theses" is - Oil Stocks Are Going to Zero (unless oil companies start to shift their paradigm).  Behavioral and mental changes have already begun.  People are already more conscious about the environment and are changing the way they live.  The biggest use of petroleum is the transportation sector.  If that stops, and it is stopping, where will the oil prices go?

Russia may think that it has a strangle on the world (at least Northern Europe), but, the war that it wages on Ukraine may have hastened the death of oil.  If the human kind had never found oil, solar technology would surely have been much further along.  What is the "cheapest" form of energy, that is ALWAYS there?  The SUN, of course.  We only need to be better at "collecting" it.

If we take a look at the oil stocks right now, we will find that they have just recently tested their all-time highs.  Let's take XOM, for example:
 

XOM (Monthly)

From XOM's monthly chart, we see that XOM has just tested its all-time high near $105, and the rise from the low-$30s in 2020 is overly extended.  Let's take a look at the XOM's daily chart.

XOM (Daily)

XOM has dropped in recent sessions, along with the other big oil stocks.  It appears to be ready for a bigger fall, down to test the support between $84-$82.

Buffet's purchase of OXY shares earlier this year, perhaps due to Russia's war on Ukraine, helped to drive up the stock and the whole oil sector.  What happens when Russia withdraws from Ukraine, as it is more and more likely that it will?  What happens when news comes out that Buffet sells all of his shares in OXY?  Unless OXY is changing its paradigm as an energy company and start to divert away from oil, it is doomed like the rest of the oil companies.

So, as the broader market corrects further, oil stocks have got to go down.  What about solar stocks?

Solar stocks have been hot recently.  FSLR and ENPH have been among the hottest.  But, perhaps even solar stocks may need to take a breather right now.  If you are not already in these solar stocks, there will be better entry points soon.

Good morning and HappyTrading! ™​

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