Will The Real Leaders Please Stand Up:
When new bull markets emerge, new leaders will come to the forefront. That does not mean old generals can not participate, but the clout they once received will be limited. This is the dilemma facing the energy stocks now. Past winners like EOG and PXD, former best of breed players now sit 34 and 36% off their most recent 52 week highs respectively. The chart below shows the preference of safe, mundane names in 2019. The real divergence between the higher beta names, and the dull integrated plays began in late December. Is that a sign that market participants are not convinced these names are good investments? What the sector needs is some new leadership, some fresh blood and that seems to be absent at the moment.
Crude On The Move:
WTI surged nearly 3% Wednesday given a nice boost to the oil group. The XLE was the second best actor of the major S&P sectors higher by 1%. One should remember the nascent strength in ’19, or dead cat bounce, whatever your bias is, the ETF is still higher by nearly 15% and ahead of other space such as financials, discretionary and communication services. Below is the chart of WTI, and I am not sure if it represents a stronger economy, weaker greenback, or seasonality. All I know is that the PRICE is sloping northward. The bulls can take solace that it is doing so in a gradual fashion, a positive trait.
The big integrated plays carry plenty of clout in the ETFs. We know XOM and CVX comprise of well more than 40% of the XLE. In addition to their supertanker status, which means it is hard more them to make a real strong move in any direction but gives price stability, they do provide investors with juicy dividend yields. The chart below of BP, and how it appeared in our 2/28 Energy Report, yields 5.6%. Wednesday it jumped through a bull flag pivot and is gravitating toward a 47.26 add on in a double bottom pattern nearly 10 months long.