Animal Spirits Within Energy:
There has been a lot going on in the oil group, with probably the biggest development the USA becoming a net exporter for the first time in many decades. It has had to deal with the greenback with the UUP in an overall uptrend, even as the 10 year yield is acting poorly. This is all just macro talk, which is important, but takes a back seat to PRICE action like everything else. It is all in the reaction of PRICE to all the news, and with the XLE up more than 18% with the first quarter about to end, it is hard to ignore. The move comes with a caveat, as it is coming off very depressed levels. Keep in mind 2017 was the second worst, and 2018 was the worst actor of all the 11 major S&P sectors. Is the group poised for a relief rally that witnessed it being the BEST performing group in 2017 up 27.4%?
Drillers Gushing Profits:
It is not just important to look for specific sectors that are acting well, (remember the vast majority of a stocks advance or decline can be linked to its industry) but one should also drill down within the exact space to see where the real strength is coming from. Below we see the obvious vigor in the equipment plays compared to the exploration names. And when I was looking through the holdings of the OIH, of course it is weighed down by big laggards like SLB and HAL, with both making up more than one third of the ETF. Each of those names are more than 40% off most recent 52 week highs, which makes the power in the OIH even more impressive. Was surprised to NOT see fresh leadership in the OIH, like a PUMP that is trading just off ALL TIME highs.
Many names in the beat up, but now ascending energy group are climbing the staircase higher. Bulls hope they do not take the elevator down. So far so good, and PRICE is paramount and must be respected. Below is the chart of PDCE and how it appeared in our 3/14 Energy Report. This former best of breed name is looking for its THIRD double digit weekly gains in as many months. It is higher more than 50% in 2019, and we are big proponents of round number theory and once this name climbed above 40 there has been no turning back. A move above the 200 day SMA will put this on a possible quick move to 50, the measured move.