Following the money in energy, Part I


All of a sudden, energy is rallying. Not only does the sector’s 7 percent gain in the last month dwarf the S&P 500’s 2.7 percent run over the same period. It’s also flashing some other positive signals that may signal a broader turn has occurred.

First, breadth is strong and getting strong. Almost four-fifths of the companies in the SPDR Energy Fund (XLE) outperformed the S&P 500 in the last month. But in the last two weeks, over 90 percent of its members have led the broader market. That suggests a quickening stampede of dollars into the space.

The chart of the same XLE may offer fodder to the bulls as well. Its 50-day moving average rose through its 200-day MA in early November, a so-called “Golden Cross” bullish reversal pattern. And, its much longer-term 500-day MA is also rising for the first time in almost two years. Has a turn finally occurred?

This is the first installment in a series on the Energy Sector. Next time we’ll look at a group of shipping companies behind an major shift in global hydrocarbon supply that will likely catch many Americans by surprise.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.