MAGGIE LAKE: Is there opportunity in this down market? Hi, everyone. Welcome to the Real Vision Daily Briefing. Here with us today is Tony Greer, editor of The Morning Navigator newsletter. Hi, Tony.
TONY GREER: Maggie, how are you today?
MAGGIE LAKE: I'm okay. How are you doing?
TONY GREER: Fabulous. Thank you. Let's go.
MAGGIE LAKE: You're probably one of the few people saying that, Tony, because it's been a tough beginning of the week, end of last week, and we saw today, stocks, bonds, oil, gold, all moving lower. What do you make of this market action?
TONY GREER: Man, there's a tug of war in it. I see a tug of war every day between the recessionists and the inflationists, as we call them. Obviously, we had a massive headline last Thursday with Jerome Powell at Jackson Hole, where he basically pledged to fight inflation that they see being around for an extended period of time, I forgot the exact words he used. But obviously, that freaked out the market, the S&P took a big spill.
We got saved by the bell on Friday, treaded water yesterday, and then the S&P broke its last line of technical support today when it fell below the 50-day moving average. Now, we're seeing some follow through. But what we have been seeing is the S&P treading water and retracing.
We saw a big catch up move in natural resources towards the end of month of August as interest rates rose with that Powell comment, and it just looks like stocks are taking it on the chin, because they're not going to be well suited going into this economic slowdown with the Fed fighting inflation, moving rates higher. It's going to be a tough slog for the S&P for sure if higher rates are on the agenda. I think that's what we're seeing pan out in the markets this week.
MAGGIE LAKE: Yeah. And I think, what worried people as well is you had some of the Fed official, I think it was Kashkari yesterday saying, yeah, we saw the market reaction, we were pretty happy with it. They're telling you that risk assets and stocks are a casualty they're willing to tolerate in order to burnish their inflation fighting credentials.
We are in this last week of August. I don't know what you've seen in terms of volumes but the selloff has been pretty orderly so far. Is there a risk that when we get people coming back and plugging back in in September that we have a uglier, push to the downside and break through those lows we saw?
TONY GREER: Yeah, absolutely. That's a risk, especially now that the next line of support in the S&P is probably that double bottom down at 3750 that we vaulted off of in June. With that being the low hanging fruit, that's probably what, another 4% or 5% lower from here, and then we'll see type of thing. But I don't want to start calling too many moves in a row. I don't like to do that. I'd like to focus on the one that's happening right now.
Right now, the S&P is breaking down below the 50-day, it's being led by all of the natural resources trade, oil services, metals, and mining on the downside. Technology is also getting beaten up today, just not as bad. You've got builders in retail, it's all in the red. You've got the interest rate sensitive stocks falling, and you've got natural resources stocks all pulling back from a dramatic high that they just made in-- there was the natural resources stocks, Maggie, if you recall over the last several weeks that were holding the S&P together while technology was failing those retracement levels and coming apart.
Right now, they've got every sector on the run. And we happen to be back to backing this first bout with natural resources selling with this 5% selloff in crude oil from $98 to $92. Doesn't seem like it's got a lot of oomph behind it in terms of fundamental or headline firepower. It seems to be going on the fumes of this Iraq headline. There's going to be less trouble in Iraq and more of its oil is going to be available. Maybe that's what took the last couple of percent out of the price.
But it seems to me like the moves that are going to be persistent that have been consistent with higher dollar and higher rates are going to be higher commodities, and probably lower equities led by tech stocks. And that's what we're seeing pan out.
MAGGIE LAKE: Yeah. And Tony, that's why we were thinking about where are the opportunities, or are there opportunities in this market? We'll get to the timing all this because I think it's tricky, and as you say, we're in this really volatile period, but Warren Pies tweeted out something about that supply and demand push and pull that we're seeing play out in the oil markets. And we thought this was really interesting.
He said oil bear was arguing that Saudi statement last week and the flaring political risks in Iraq and Iran have saved the bulls. Remember, bullish things happen when spare capacity is thin. The idea that you can just chalk up a couple of not temporary but geopolitical headlines, the fact that we saw that move up that you were talking about in oil. Talk to me a little bit about what you think this range for oil looks like when you've got that underlying issue of very little capacity out there.
TONY GREER: Yeah, I've been telling my clients, Maggie, that the one of two stories that I would not take my eye off as it relates to the energy market is one of which is Prince Abdulaziz's comments. I think at the very beginning of this week, or late last week, where he said that he noticed that the paper markets were clearly separated from the physical markets right now, which were extremely tight. He senses some, not sure what words he uses, but manipulation, certainly of some sort, is what he seemed to lend himself to.
And right from there, the oil markets took off. It sounds like he may have fired a warning shot to whoever he decided might be selling paper oil futures just for the effect. Who was a candidate to do that? Certainly, the administration is with election pending in November, midterms pending in November, and the gas price finally falling from $5 to $4. He senses a little bit of a canary, I think it's important to keep an eye on that.
I think it's important to keep an eye on this week, things like spreads have really bounced off of the lows that we saw last week, when the calendar got deflated with oil on its lows, we're seeing it come barking back this week with the oil rally to the extent that front month WTI spread [?] at one point yesterday tripled from 30-- well, not in one day, but from its lows of around $0.30, traded well above $0.90 in all of three or four sessions. That speaks to the fact that the market remains tight and the fact that the calendar still is likely to widen out.
And I think that likely the price is going to stay somewhere around here. The market seems to be magnetized towards like 92 middle, if you will, trading at 88-96 range, if we can call it that for now. But it feels like it's just battling up against his moving averages and trying to take off again, if you ask me. One of the big tells I think, Maggie, also in August was the fact that energy and natural resources stocks before today, and they still should be positive. We're up in a month that the S&P got crushed, tech stocks got crushed, and the commodities complex held in tight.
I think that that's the underlying theme. And I'm very curious to see how that translates into tomorrow's month end closes which are going to be really, really important.
MAGGIE LAKE: Yeah, I just want to circle back. And let's talk about that. I just want to circle back, because I think it's so important that you brought that up. We did see that comment, it was funny, because it was in the midst of all the Fed headlines coming out and stuff so I'm not sure everybody paid as much attention to it as they should have. But really interesting to hear you put some color around that.
And again, it's speculation, but clearly the idea that there are some people that might be playing in the market. There was a US consumer confidence number out today, it advanced to its highest level since May. And we all looked at that and thought that's interesting when everyone's really worried about recession. Why is that? Because Americans are growing more optimistic about the economy amid falling gas prices, that gas price is so critical to consumer expectations. You can see the connection back through the threat you're talking about. That's really great to highlight that.
TONY GREER: That's unfortunate to hear because I don't think that gas prices are going to fall very much further so consumer confidence is maybe a sale up here in the 103 area or something like that. But we continue to see tight markets, we continue to see diesel prices, upward pressure and tightness in diesel prices. We've got the main event, as I've been calling it, panning out across the pond with European electricity prices gone wild, driven by their natural gas prices gone wild, driven by their energy policy gone wild.
We're going to see what breaks here likely in the coming months, the story is that they have gotten enough storage, or at least they're at 80% or 85% capacity and have enough storage for this winter. I still believe that they're beholden to all kinds of upside risks including Putin risk, Mother Nature risk and just general things going wrong risk, so we'll see how that pans out and what the energy market does to follow. But so far, we've got a pretty good cap on natural gas at $10 and it hasn't been able to break through there.
My sense is if it doesn't get scooting through there quickly on some a headline, that the next big move and natural gas might be down from here, but we'll see.
MAGGIE LAKE: Tony, for oil, if we've got that capacity issue that basically no investment, that structural problem of very, very spare capacity, really no margin for error, do you buy oil? Are you long oil? Or no, you can't, because of the threat of depression? Gosh, I hope it's not that, recession, keeping a lid on oil. Is it just keep the range in, and you can't be super bullish on oil, because of the potential of a looming recession and the Fed?
TONY GREER: Yeah, you have to understand that as an oil bull, which is the camp that I'm in and have been in for two years plus now. It's going to be a battle through several things on the upside that your risk is obviously much slower economy, your risk is any pivot in policy out of the administration, which doesn't seem likely, but it's certainly a risk that's a nonzero probability, and things like that.
With your eye on those risks, but then seeing how the administration tends to double down and the establishment in Europe tends to double down on the things that they've been pushing, despite the damage that they're causing, that's where you start to make connections to what happened during lockdown. During lockdown, we saw all the restaurants closing, et cetera, et cetera, because they have no cash flow. Now, during all of these restrictive energy policies causing electricity prices to go berserk, now you're seeing the small mom and pop shops forcing to close.
You're seeing stories on Twitter about the bakery whose electricity bill went from $12,000 to $60,000 over the course of a month and something that is literally a "we have to shut down" type of scenario. You wonder what's going to break here, but we're certainly getting closer to where the rubber meets the road in terms of something has to give in terms of the ESG and the Davos crowd energy policy that's being pushed really hard. At least it's met with some resistance finally, so we'll see what happens.
MAGGIE LAKE: Yeah, absolutely. Andreas Steno Larsen sat down with Mark Nelson to discuss-- the charts of the electricity prices in Europe are really hard to wrap your head around when you see them, I think somebody was saying, it looks like the craziest risk asset you've ever see. And I had a friend visiting from Germany, and we were talking to them about their real concern about what's coming this winter, and people are just struggling to pay those electric bills.
Andreas sat down with Mark Nelson to talk about that, and what the continent is going to have to face. And they talked about the changing sentiment around nuclear. Very interesting. Let's have a listen to a clip from that.
MARK NELSON: Part of the pain of this energy crisis is going to get people to figure out which of their fears and which of their concerns don't matter for feeding you, yourself and heating your family and having warm showers and things like that, and which of your concerns are relevant.
And that will be in the favor of nuclear obviously, that's all why we're seeing the Pols move in that direction, from Germany to Britain to Japan, the Pols are moving in the correct direction. Then you need a program. What's a program? Well in the UAE, again, they spent a few years getting set up to do a good bidding process. They did a bidding process, chose a winner. And soon, that winner started digging and building.
The official start was about I think 2012 and then they had their first reactor come online I believe it was 2019. What is that? Oh, sorry, I guess it was 2020 for the official start. 2020, you get a unit come on, nice. 2021, you get another. 2022, we're going to get another. 2023, we're going to get another. Was it eight years to build? And we think of four reactors, is that eight years, so maybe 32 years? No, it was eight years for one, nine years for two, 10 years for three and 11 years for four.
And at that point, it's a quarter of their energy supply, of their electricity supply rather. That's a program. Just shows you nuclear maybe is just, if people can come along and just wreck it, maybe that's not great. But the other energy sources are not doing so hot. I think that's the big thing here.
MAGGIE LAKE: And that entire interview is available on our website. Really fascinating discussion. And Tony, the stakes could not be higher for Europe right now.
TONY GREER: Yeah, that couldn't be higher, the uranium trade is an interesting one. I enjoyed that clip, Maggie, I think it's fun to watch the ESG fade trade, uranium tends to come to life, when you see-- in German, electricity prices go to 1000 euro per million btu over there. We saw Cameco report really strong quarter at the beginning of the month, that got the sector rolling, and now we're breaking through a moving average resistance in the URA ETF. And it looks like it wants to take off again.
As a fossil fuel bull, I've got to understand that there's another, at least another sheriff in town out there. It seems like it would take the lobby group the size of the US pharmaceutical lobby to get people to become acceptant toward nuclear power again even though that we've proven out how much safer it's become over the years, and how reliable it is, et cetera, et cetera. That's the ace in the hole that the European leaders can finally play.
When the rubber really hits the road and more shops start closing and more people get unemployed, and there's a bigger energy price crisis. And that may be a little bit of the bear some downside risk to the fossil fuel trade. And that might be a little bit of a give and take that we're starting to see in the markets now where when fossil fuels take a dip, nuclear comes to life. If that dynamic starts, it'll be interesting to watch.
MAGGIE LAKE: That's a really interesting way to think about it, Tony, because I don't think we've really all gotten our minds around that because it has been a nascent market that was a lot of people talking about it in the way you are from a fundamental point of view, from a trading point of view. By the way, Raul Duke on YouTube, saying, what is the UK going to do this winter with energy bills up 80%? People are going to freeze and go hungry. That's why we said the stakes could not be higher.
There is real concern about the fallout. It's not just the UK, it's across the continent, at least, especially northern Europe. But Tony, for all that bullish sentiment, I'm just curious, because I know you watch these things from a trader perspective, too. We've had a big move, it's been a quick one. You said URA, I think we looked up 10% in last five days. Cameco, which that ticker is CCJ, up 19% in five days.
Nuclear is a long story, it takes a long time for these plants to get built, for the transition to happen, for the investment, it's capex heavy. Would you be worried about a move that quickly? We always go back to the conversation that Jared Dillian had on Twitter about too many a-holes being in the space. What do we need to understand about looking at that, especially if some people are not familiar with the nuances of uranium?
TONY GREER: Well, first of all, I have to put forth my usual disclaimer is that uranium is not and has never been my trade. I just tried to keep up with it from a macro perspective as it relates to the trades that I'm in. I am bullish the sector for the long term, I do own some uranium risk in longer term trading accounts. I have no short-term uranium risk on.
My contribution at least can be the stuff is uranium, it's nuclear, it is very headline driven, it is very volatile. As you said, it's a very long time to play out. It seems like whenever bulls get the upper hand, bears have got plenty of time to wear them back down again and wear the prices back down. But if the price of uranium remains bid, which should be helped by the Sprott Physical Uranium Trust taking a lot of physical uranium off the market, that's what the market needs for uranium to go bid so that it's worth it for more producers incentive wise to pull it out of the ground.
And then at that point, maybe you get a much healthier and transparent uranium market that lends itself towards transition toward nuclear. Because it doesn't seem like we're going to get the power from wind and solar, it doesn't seem like we're going to be allowed to use the unbelievably efficient power of fossil fuels because we need to have higher ESG scores until everybody starts rebelling against what's going on. And we're probably still a few stages from that, but not too many.
MAGGIE LAKE: Yeah, that's