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Oil Prices Climb But Bearish Sentiment Remains Strong

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Why Oil Prices Are Likely To Climb From Here

One of the things that has always appealed to me about the energy sector from a trading and investing perspective is that it usually isn’t correlated with the US stock market. I have natural exposure there with my retirement and other investments, as I’m sure most of you do too, and having an interest in something that moves independent of equities not only smooths out the bumps along the way but also reduces the temptation to make bad mistakes, like selling at or near the bottom of a drop when the pressure mounts. If I am making money elsewhere, it is much easier to just ride out periods of weakness in my long term investments and actually keep to my regular buying schedule, which logic suggests, and every study ever done has shown, is the right thing to do.

There are times, though, when the two things seem to be directly interacting, when the price of oil, and therefore of most stocks in the energy sector, seem to have either a direct or inverse relationship with the broad US market. Over the last year or so, that has been the case. There has been an inverse relationship, with higher oil prices prompted by a global shortage of supply raising inflation worries in America, and therefore prompting selling of US stocks. The Hamas attack on Israel and their response raised even more concerns about oil supply initially, but recently, as immediate regional contagion fears have faded, the supply concerns have faded, and crude has dropped based on a weak global…





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