Why oil price decline is a mixed blessing

The U.S. stock market staged a recovery from the sell-off back in October. In addition, there has been the decline in energy prices.

What has me concerned is the continued fall of commodities and oil. Is this a supply issue or is there a big decline in demand the investors haven’t recognized yet?

If weak demand is leading the energy markets lower, then “Houston we have a problem!”

If oil does not stop falling soon, millions of high paying jobs can be lost.


Market trends

It sure seems like big funds are having to move money around in the stock market more and more lately.

First, they moved out of the small caps, then out of precious metals such as silver and gold.

During an earlier market top, selling by big investment funds hurt stocks such as Twitter (TWTR), Pandor (P), FireEye (FEYE) and Zulily (ZU).

In recent weeks, big tech stocks have taken a hit. They include Microsoft (MSFT) and Oracle (ORCL).

I am looking for the sectors the funds are moving into and trying to catch the upside caused by their buying activity.

Here are some stocks that I am watching closely to see if there may be a buying opportunity: JD.com (JD), China Dangdang (DANG), Autohome (ATHM), Bitauto (BITA), Freeport McMoran (FCX), BHP Billiton (BHP), Vale SA (VALE), and Chevron (CVX).

As always I am also ready for a major correction if it happens to show up.

In that scenario, I can use some inverse ETF funds such as the ProShares UltraPro Short ETF (SQQQ) to reduce my portfolio’s exposure.

Photo credit: mrpbps via Flicker Creative Commons

DISCLAIMER: The investments discussed are held in client accounts as of November 30, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.