Why energy stocks have room to run and your crypto coins better be at all-time highs

JC Parets, founder of allstarcharts.com joins Yahoo Finance's Jared Blikre to break down the latest price action in energy stocks as well as cryptocurrencies.

Video Transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live. As we were talking earlier in the show, energy is still the standout here on the year, the strongest performing sector. But some are raising potential new risks. Others are pointing to strength there, continuing to wrap up the year, triggering a new bullish stint for stocks. And for more on that, I want to bring on Yahoo Finance's Jared Blikre, who has a special guest today to dig into all that. Jared.

JARED BLIKRE: That's right. We have none other than JC Peritz here, proprietor of allstarcharts.com. And JC, great to see you. And you're talking about a new bull market in stocks. And, you know, the definition of bull market and bear market not agreed universally, but just break down some of your reasoning here.

JC PARETS: Yeah, bull markets, you got a lot of stocks going up, and bear markets, you don't. I mean, I wish that there was, like, a real, like, mathematical formula for that, but it's really that simple. Are most stocks going up, or are they not? And most stocks have not been going up since February, right? We've been doing this. We do this every couple of months or so. And we've been talking about it. That's when stocks peaked. That's when enthusiasm peaked.

Emerging markets stopped going up in February. Small caps and mid-caps, they all stopped going up in February. The IPO Index stopped going up in February, biotechnology. Just the NASDAQ advanced decline line, the NASDAQ new highs list, just so many things peaked in February. And that was eight months ago. Check my math. Something like that or more than eight months ago. So, which is perfectly normal because we had the greatest 52-week period, like, ever, or something, right, after the March lows.

So, some consolidation, some digestion is perfectly warranted. And now we can move on. And the weight of the evidence is suggesting that that period of consolidation that took approximately eight months is complete. And we can now move on. And now most stocks can start going up again, which they haven't.

JARED BLIKRE: I want to get some charts here. So I want to tackle the energy sector first. This is XLE S&P 500 energy sector. And I'm going to pull this up on the YFi Interactive. This is actually a 10-year chart. I'm pulling up the longer time frame because we're at a pretty big level here, right around $60 per share. We can see up against that level right now.

It's been in play in 2019 and also 2015 when we got that false breakdown here. But also, we have a negative trend line that it is right up against. This isn't drawn perfectly, but it's right there. So what are you seeing in the energy sector, which, as Zack pointed out earlier, the best performing sector by far of the year?

JC PARETS: Yeah, and the one that people own the least amount of, which I also think is super bullish. You know, look at those 2016 lows in the XLE. Look at the June highs in the XLE. If we're above those levels, call it 55 in the XLE, I think you need to be very, very overweight energy. The NASDAQ 100 has 0% energy weighting. You look at the growth index, 0% energy. If you look at the S&P 500, which supposedly is a broad index with a lot of sectors, it's less than 3% energy.

So US investors with their home country bias-- and by the way, other investors in other countries have home bias, too. but in this particular country, it's all tech heavy, growth heavy investors in America, just do not have exposure to commodities in general, yet alone oil and the XLE or energy stocks in general. And these are tiny little companies. These aren't these massive companies. So if oil's going to 150, you're going to get triples. You're going to get four or five baggers in some of these oil and gas names.

JARED BLIKRE: Well, I want to switch over gears here to Ethereum. And this is a market that just made a record high, eclipsing the May highs from earlier this year. I know you're into a lot of other coins as well. But just your quick thoughts on crypto right now.

JC PARETS: Yeah, you know, listen, whether it's gold or crypto or bonds, I like things that are making new highs, right? Things that are making new highs have a much higher likelihood to continue to make new highs and just to completely reverse, there was a lot of cryptocurrencies making new highs. Bitcoin and Ethereum are struggling with their former highs from the second quarter in May. And that's perfectly normal. This is the first time we get back to those levels. So we know from prior experience there's more supply than demand here. It's not JC or Jared saying that. It's just facts. It's just the math.

So the question is, how long does it take demand to finally absorb all of that overhead supply? And the answer is, I don't know. I'd rather own the cryptocurrencies that are already above their first half highs. So if you own a cryptocurrency and it's not above its first half highs, you own the wrong cryptocurrencies, right? We want to own the ones that are already working. If we're above the first half highs, Elrond, Avalanche, Algorand, Cosmos, Helium. I mean, you just go down the list. These charts really look similar. And the trades are the same. If we're above the first half highs, you own it. If you're not, you don't.