In my S&P 500 forecast for February and March, I found what I believe is clear evidence that the market is going to break further to the downside, contrary to popular opinion that we’ve put in the bottom. In October, I predicted that the bottom wouldn’t be in until around May of this year. I still believe that prediction is accurate, although the level I predicted on the S&P 500 is likely to be wrong.
The Trend is Down: Let’s Get Short
Without even looking at a chart, let’s consider the economic and social challenges faced by Exxon Mobile. First, XOM topped out at $92.5 per share with oil at $140 / barrel and record profit margins. With oil down to $40 / barrel, XOM’s profit growth, margins, and net profits are in for some tough times.
Second, demand for oil and gas has plummeted, and in fact, demand shrunk for the first time in over 20 years. People, particularly us gas hungry Americans are cutting back on driving, increasing use of public transportation and hybrid vehicles. Combine that with decreased use of heating oil and increased dependence upon natural gas and other heating alternatives, and you can see that demand for Exxon’s primary product is at risk. I believe these changes in behavior will indeed be permanent, and the next great boom in the world’s economy will be “driven” by the move to newer, cleaner, and more efficient energy sources.
Of course, I am a technical analyst, and none of the previous really makes a difference in my trading. The fact is XOM and the S&P 500 are in clear down trends, and XOM is presenting a very profitable chart pattern on the short side.
Take a look at this video and you’ll see why I believe there is great profit potential in shorting XOM
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