Markets rallied strongly Monday, something few would have predicted over the weekend. The S&P 500 led the way with a gain of 1.5%, and is now flirting with the UNCH mark YTD, and the Nasdaq rallied 1.1% reclaiming its upward sloping 200 day SMA. Sure some groups were expected to advance Monday, namely defense related group and travel names would sour, but the overall action of the indexes was impressive. One would have believed crude would strengthen with the air attacks by France over the weekend, but initially that was not the case until it bounced near the round 40 number. Remember it has been weak following the reversal into the round 50 number last month. Energy happened to be one of the best performing groups Monday and the underlying equities were firm even as oil was weak early on in the session. We think one would be wise to begin legging into leading names in the sector. Looking at the XLE the chart has made a series of higher highs and higher lows since the late August weakness. The higher lows were barely kept intact with a separation of just 9 pennies with intraday lows on 10/27 and 11/13. Both of those lows also were the recipient of 50 day SMA support too. Among the generals in the space we recently profiled PXD in our Friday 11/6 Game Plan. Since the week ending 8/28 volume trends have been excellent with no weeks of distribution and it is higher 7 of the last 12 weeks. 3 of the 5 down weeks bullishly CLOSED in the upper half of the weekly range.
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