The most bullish sector of the US stock market are the energy stocks. The SPDR Select Sector Fund – Energy Sector (XLE) is on the verge of making a new 2022 high. If this ETF continues to rally it could provide clues for a significant broader US stock market top.
The 10/09/22 blog “The Relationship Between US Stocks and Crude Oil” noted.
“The US stock market and Crude Oil – West Texas Intermediate (WTI) have similar seasonal patterns, specifically both tend to trend down from September to October. Crude Oil’s powerful move up from its late September 2022 bottom could continue through October and perhaps longer. This counter seasonal move up could be a hint for a near-term rally in US stocks.”
Subsequently both Crude Oil and most US stocks have rallied, with the energy stocks leading the way up.
The daily chart courtesy of Trading View illustrates the relationship between XLE, the S&P 500 (SPX), and the Crude Oil futures continuous contract (CL2!).
Note that after the SPX top in early January, CL2! continued to make new highs and topped in early March. XLE made an intermediate peak on 03/08/22 declined and then made a new 2022 high on 04/14/22. Subsequently XLE continued climbing, making its current 2022 high on 06/08/22, the time between the April and June tops was 37 – trading days (td).
On 11/04/22 XLE was marginally below its 06/08/22 high, assuming XLE can make a new high on 11/07/22 this could give us a rough estimate of when the current rally terminates. Adding 37 – trading days to 11/07/22 targets 12/30/22 for what could be a significant XLE top.
Based upon what’s happened in 2022 if the XLE makes a top in late December 2022 most likely it could occur after the SPX and Dow Jones Industrial Average peak – perhaps early or mid – December.
If during the week of 11/07/22 to 11/11/22, the SPX can exceed its recent high made on 11/01/22 a blog will illustrate when the SPX could reach a significant peak.
Four Dimension Trading 