It's Electric ⚡️
Energy Markets, SPY, & a new 🚀 Watch
Good Afternoon Stackers,
It feels great to say this, happy football Sunday! After what always feels like a long hiatus, the NFL is finally back. I’m aware this means my substack likely will no longer be the most anticipated part of your Sundays, rightfully so.
On a much more serious note, I’d like to take a moment to remember all those that lost their lives or had their lives forever changed 21 years ago today, on September 11, 2001.
The stock market closed the week in a very bullish manner; after protecting 403 on Friday morning we ran above 407.5 before pulling back slightly into close!
We were aware on Friday morning that the gap-up placed market maker’s longs well ITM, and any support >401 was a warning sign that traders should not be short.
The action on the 3-minute chart portrays the effort I was expecting with support >403.
We now head into one of the most significant option expirations of the entire year, the September monthly OPEX. This week will undoubtedly be one that is controlled by option activity, max pain, and dead money’s trapped rescue missions.
This week’s edition of my newsletter looks at what’s occurring in the global energy markets, new positioning within US energy stocks, what’s next for the SPY, one bullish biotech, and one stock that looks primed to 🚀.
It’s Electric ⚡️
You can feel it.
There’s been some wild action in the European energy markets; this action shouldn’t be discounted by traders and citizens alike. Other countries are starting to feel the impact of rising energy prices, which can impact global markets.
First, how did Europe end up here? European energy prices have soared in recent weeks due to retaliation by Kremlin for the sanctions placed on Russia by the West. With a quickly diminishing gas supply, the new retaliations effectively leave many parts of Northwestern Europe with 0 reserve supply, creating an energy deficit. Looking further back, we can see that many aspects of Northwestern Europe were already quite vulnerable before Kremlin shut down Nord Stream 1.
Although attempting to provide relief via the injection of liquidity, there is still expected to be another rise in energy prices in January 2023 by 51%.
A rise in energy prices of this size could place nearly half of all European homes into fuel poverty. Fuel poverty can be defined as a household using >10% of all income on energy.
How does this crisis impact the global markets?
Inflation
Remains at an elevated risk of increasing/hyperinflation due to energy prices
Consumer Debt
Due to rise as household expenses continue to rise
Less global liquidity
Forces households to dip into savings, and sell investments to afford to live
Can drive markets lower
Although the brunt of the impact has been felt in European countries, don’t be naive enough to think it’s not impacting the United States.
There is the scary but very real potential that the energy crisis has the potential to force the European economy into a deep dark and cold recession. Policymakers must take any means necessary to avoid low-income Europeans being forced to choose between heating their house or eating food.
Energy prices are also impacted by factors out of everyone’s control. The main one is the weather. Will we have a very active hurricane season? Will there be any natural disasters? How cold and long will the winter be? All of these have the potential to impact energy prices. Often times an energy market is at a breaking point, and one of these factors is likely contributing to the cause.
Energy stocks have also seen an increase in bullish flow lately. Two stocks that actually saw 0 bearish flow during Friday’s session were;