A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
Oil prices are marginally lower Wednesday but some analysts are predicting a 'violent' rally in West Texas Intermediate crude,
"Oil's ripe for a so-called 'short-covering' rally -- where traders who sold contracts hoping to benefit from falling prices buy them back to take profits or avoid losses. Short positions held by speculators in Brent rose to 169 million barrels last week, the highest since records started in 2011, according to exchange data. 'The market is vulnerable to a very violent short-covering move,' said Thibaut Remoundos, founder of Commodities Trading Corporation Ltd."
There is a major fly in the ointment for oil bulls however as U.S. gasoline demand remains seasonally weak.
"Oil's Record Bearish Bets Prompt Warning of Violent Rally" – Bloomberg
"Cheapest Fuel Since 2005 Brings U.S. Drivers 'Christmas in July'" – Bloomberg
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Goldman Sachs strategist David Kostin has raised his 2017 target for the S&P 500 but that would be a lot more bullish if he didn't expect it to finish the year below the current level,
"We raise our year-end 2017 S&P 500 price target to 2400 from 2300, reflecting a 1% decline over the next six months… We expect EPS growth of 9% this year will be offset by a 4% contraction in the forward P/E multiple to 17.3x from 18.1x. The prospect of accelerating inflation, higher policy rates, and rising 10-year bond yields will weigh on S&P 500 valuation."
Mr. Kostin listed a number of stock that he believes will outperform in what he expects will be an extended slow growth environment.
"@SBarlow_ROB GS's Kostin raises forecast, still bearish" – (research excerpt) Twitter
" @SBarlow_ROB GS recommends these secular growth stocks" – (stock table) Twitter
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Peter Garnry, head of equity strategy at Denmark-based Saxo Bank thinks the recent weakness in technology stocks is the beginning of a trend,
"US technology stocks have been very weak lately, both in absolute and relative terms (see chart). The rebound has no strength, and the massive outperformance year-to-date is the segment's biggest weakness. Valuations are historically high in US tech stocks, and sentiment has weakened fast over the past 24 hours. As a result, we are selling US technology stocks (USNAS100.I)"
"US technology stocks looking heavy — #SaxoStrats" – Saxo Group
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San Francisco Federal Reserve Bank President John Williams is making more bearish noises about equity markets than we're used to hearing from central banks,
"'The stock market seems to be running pretty much on fumes,' [he said], 'It's something that clearly is a risk to the U.S. economy, some correction there -- it's something we have to be prepared for to respond to if it does happen.'"
"U.S. stock market 'running on fumes,' Fed policymaker says" – Report on Business
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Tweet of the Day: " @TheStalwart Cybersecurity stocks outperforming bloomberg.com/news/articles/… " – Twitter
Diversion: "For years, we've been told fat clogs our arteries. Now, scientists say that's all wrong" – Quartz
Scott Barlow