There is one number I am sitting here praying for, and the market is walking me toward it.
That number is $50 on XLE, the big energy ETF. It closed Friday around $55.86, already down from a high of $63.46, and I want to see it fall the rest of the way.
Here is why I am rooting for my own watchlist to drop.
Peace is breaking out in the Middle East, allegedly getting signed this Friday in Switzerland, and oil is getting crushed on the news.
Crude is down to about $80 from a war-driven high near $119. Stocks are ripping, oil is sinking, and the energy names are getting sold right along with it.
Most folks see oil falling and assume the oil companies are in trouble. That is backwards.
At $75 to $80 a barrel, demand does not even flinch, and the big integrated names get fat margins refining it and selling it.
Exxon is going to make a fortune over the next year. So are Chevron and BP. They are all going to crush it.
So I want the panic to keep going a little longer. As oil keeps dropping, people are going to keep misreading it and dumping the producers, and I think XLE has about another 10% to fall, right down to $50, which is sitting on its 200-day moving average.
Remember, half of XLE is just Chevron and Exxon, so you are basically watching those two find their bottom.
When it gets to 50, that is my generational buying opportunity, and I will be long pretty much every producer name I can get my hands on. Be ready for that. The crowd is going to be selling me the exact bottom.
Now, the pipelines are a different animal, and I am already loaded there.
Names like Energy Transfer are selling off too, which is just silly. If this war changed anything, it changed where people think the risk lives, and that makes American pipelines more valuable, not less.
I own a cartoonish amount of Energy Transfer. I bought it down in the 12s, there is no reason to sell it now, and I will back up the truck again at 17.50 if it hands me the chance. It is a war. It is what it is.
One more thing to watch this week, and it is the signal I trust more than any chart. Keep your eyes on insider buying in energy.
If Kelsey Warren steps up and buys 10 million dollars of Energy Transfer with his own money, that tells you he has more confidence in it than in anything else out there. The people running these companies always know before we do.
Cheaper gas at the pump, fatter margins for the majors, and a washout that hands me my entry.
I have been waiting for this setup, and it is finally lining up.
Your only option,
Mark Sebastian