Crude oil traded as high as $52.22 a barrel on Oct. 19, then declined by 12.3% since then, putting Texas Tea in correction territory. McDermott (MDR) is the only one of the five oil services stocks to outperform oil. Meanwhile, Diamond Offshore (DO) , Noble (NE) , Transocean (RIG) and Tidewater (TDW) are mired in bear market territory, down between 31.1% and 86.4% from 2016 highs set between March 4 and June 8.
Diamond Offshore reported earnings on Oct. 31 and beat analysts' estimates, but the stock slipped below its 50-day simple moving average. McDermott reported earnings on Oct. 25 and beat analysts' estimates and the stock moved higher, setting its 2016 high of $5.57 on Oct. 27. Transocean reported earnings on Wednesday and beat estimates with limited share price reaction. Noble reports on Nov. 3 and Tidewater reports on Nov. 17.
Oil is the lifeblood of the U.S. economy. Back in the 1970s, the Arab-Israeli War of 1973 to 1974 and then the oil embargo and long gas lines resulted in the doubling, then quadrupling, of oil prices. That imposed skyrocketing costs on consumers. Lower oil prices today are reversing the oil-induced inflation of the 1970s and early 1980s. Regulators, including the Federal Reserve, should encourage lower oil prices and ensure that the U.S. becomes energy independent.
Here's the weekly chart for Nymex crude oil.
Courtesy of MetaStock Xenith
The weekly chart is negative, with oil below its key weekly moving average of $47.60. The signal calling for an oil glut longer term was the weekly close below the 200-week simple moving average when it was $96.17, during the week of Aug. 22, 2014. The weekly momentum reading is projected to decline to 73.60 this week, down from 79.22 on Oct. 28. Note that the uptrend connecting the weekly lows since the 2016 low of $26.05 during the week of Feb. 12 has been broken to the downside. The horizontal line is my annual pivot of $44.07, which has been a magnet for all of 2016.