As expected, the market is retreating a bit this morning, and that is a good thing. I like that the VIX is rising a bit as well, almost 4% this morning, which puts it into the mid-eleven range. I will feel even better if the VIX gets to and holds in the 12-13 range and the market trades in a tight range for a while. It needs to settle into its new highs and consolidate a base.

I am not happy the RUT (small-cap index) is retreating, as I still have trades that need to come back, but I am happy the index is following the general market trend. If you recall, not too long ago, many celebrity analysts were suggesting the market was headed for a big correction because small caps were diverging from big caps. That was the “conventional wisdom.”

  • There’s a lot more so-called conventional wisdom floating around in the market’s ether than there are cold, hard, proven facts.

Ain’t that the truth? Charts, history, theories, mathematical methodologies, and current news all are sources for so-called conventional wisdom and all have something that points to a potential for the market, but none has a lock on what will come and rarely are all in synch. So when the conclusions become “conventional,” meaning the common thinking on the street (think breathless media) is such and such, well, then, it is time to dig a little deeper.

China and Japan both showed economic improvement in the latest round of data feasting. The Eurozone failed to meet PMI expectations, but still stayed above the 50 line (51.9), which means the Eurozone economy is still expanding.  France is the weak link, as it is still struggling with its approach to correcting its budget issues. No worries, though, time will heal that economy, but, in the meantime, the heavy lifting is up to Germany, a progressive economy on the move toward the future.    

  • Solar output reached a record 24,244 megawatts on June 6, according to the European Energy Exchange AG. One megawatt is enough to supply 2,000 European homes.

The above big numbers translate to 48.5 million, which means that every home in Germany could be supplied with electricity from the sun. Of course, not all that power goes to homes, but a large chunk does and the rest goes into the alternative energy mix for homes, government, and business. That’s impressive indeed, but here is a stat that is equally impressive.

  • The share of green energy in Germany’s electricity consumption rose to a record 27 percent in the first quarter.

Solar power is a big piece of the above stat, but so is wind. Germany is among the word leaders in production of energy from wind. So why is this important to a market player? Well, this data tell us two important things: 1) the global energy transformation is in full swing and 2) there is opportunity in this reality.   

The argument against investing long term in solar or wind is the companies can only survive with government subsidies, that the cost of producing electricity through alternatives other than coal or nuclear is just too high. Well, let’s look at how Germany is dealing with this issue.

  • By giving renewables fair grid access, promoting competition, weakening monopolies, and encouraging citizen and local ownership (now two-thirds of renewable capacity, which rivals peak demand). Germany’s pump-priming investments triggered global scaling-up that Deutsche Bank predicts in 18 more months will let solar power compete without subsidy in three-fourths of global markets.

The interesting thing about capitalism is that if government regulates corporate greed and gives a helping hand to innovation and entrepreneurialism, competition will flourish and when it does, good ideas will become cost effective enough to replace old ideas that no longer work. That is exactly what is happening in Germany, France, and other parts of Europe and the world. Alternative energy is locked in and coming fast and in that is opportunity for market players.

So, get on board. Find some opportunity and go for it.

Trade in the day; invest in your life …

Trader Ed