Energy Stocks Lead the Way Up

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.         

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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