foxex: Consumer Demand

Friday, November 1, 2019

Consumer Demand

Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Friday, November 01, 2019

1. New Demand for Crude Oil Translates into Consumer Optimism

2. Crude Oil Demand Coincides with Exxon-Mobil's Beat

3. Ford Finally Rebounds

Market Moves

Oil prices rose significantly even as stocks reached fresh new highs while the price of gold edged higher and bond prices pulled back only slightly. All of these data points together implies that consumer demand is pushing prices higher in many sectors of the global economy. U.S. stock market indexes extended their streak of relatively calm trading days. For the sixteenth straight trading day, the S&P 500 (SPX), the Nasdaq 100 (NDX) and the Dow Jones Industrial Average (DJX) all exhibited a downtrend in their average true range. This is a continuation of the bullish signal these indexes manifested last week.

While investors have increased their appetite for taking risk, they appear to be looking for bargains. Perhaps the easiest place to find such bargains is in the energy sector. This sector has been beaten down, but with today's 3.62% spike in the price of crude oil (see chart below) many companies with good news are experiencing a gush of interest from investors.

Crude Oil Demand Coincides with Exxon-Mobil's Beat

The level of inventory for crude oil jumped surprisingly this past week. The good news for the oil industry is that this created more refinery business. That wouldn't matter unless consumers were demanding more oil and gas production. Thankfully for the industry, the jump in oil prices seems to indicate consumer demand is on the rise.

Exxon-Mobil (XOM) beat earnings largely on better-than-expected revenue from refinery operations. Analysts recognize that this is a signal of a trend in growing demand and the timing for the company's report nicely coincided with the price jump of crude oil, giving investors the sense that their investments are well placed.

This follows news from two weeks ago that oil production had increased and inventory had decreased at the same time. Today's news now gives analysts multiple indicators of growing demand for energy.

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Ford Finally Rebounds

The increased demand for oil and gas apparently extends to the possibility that auto manufacturers will also experience an uptick in demand. Shares of Ford (F) jumped 3.49% higher today, comparable to the gains showed by XOM and crude oil prices. The car maker has had a tough road of late. Today's price action, however, may give investors hope that the share price has hit bottom and is ready for a change of trend.

The Bottom Line

Stocks closed at fresh highs and oil prices surged in continuing signs of consumer demand. It was no surprise that Exxon-Mobil jumped higher, but even stocks such as GM and Ford moved similarly higher. The coincidence of oil prices jumping higher at the same time stocks are hitting new highs suggests that overall, consumer demand is on the rise as well.