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With the stock market now roaring back, investors are left to wonder whether the worst is behind us – or if there's more pain yet to come… particularly for the energy sector.
Given the size of the sell-off, it's clear a slew of folks expected a correction, and to that extent they received a self-fulfilling prophecy.
However, at times the decline was more like a snowball cascading down a hill with no overall rhyme or reason.
Of course, there is always the possibility that we could revisit this rollercoaster again in the short term, but it is quite unlikely to have the same velocity.
And while every segment of the market felt the brunt, energy seemed to drop with a vengeance… but it didn't last for long.
As the market bottomed out, energy stocks led the recovery, posting big advances.
So what do the latest market gyrations tell us about the energy sector?
Here's my take on where the markets go from here…
Why the Underlying Fundamentals Still Rule
Forget for a moment that some pundits still insist the losses are not over.
There seems to be a "magic formula" circulating among a few of these guys that requires a 10% correction before the patient can leave intensive care.
If they are right (and I doubt it), the decline still has some legs.
Yet, I have never signed on to the idea there are sacrosanct levels markets must reach before it returns to "health." This has usually been more of an exercise in which these same "analysts" are short and then run on TV to assure the losses hit, earning themselves a nice profit.
We also had a clear indication this time around of how computerized trading patterns and "flash trades" can distort actual market conditions. The rapidity of the flood took even floor veterans by surprise.
But as my Money Map Press colleague Keith Fitz-Gerald often reminds us, "The market is the market. When it is advancing you get on the train. When it is moving down you get out of the way."
I have always found that to be useful advice. It takes the emotion out of the trade.
But the broader markets usually aren't that rational. The first move in either direction is initiated by emotion and then extended by "extra-market" trading methods.
It's sort of like having a disturbed patient on steroids.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.