Feast or Famine:
The energy group has not been for the faint of heart the last 5 years. On the chart below, we see that the sector has been either the best or worst behaved major S&P group 4 of the last 5, with the one exception being a second to last finish in ’17. In 2019 as of today it is higher by more than 18% for the fourth best actor YTD (FIVE sectors are higher with an 18% handle including discretionary, real estate, industrials and communications services, but all are trailing technology). Will this year have staying power to CLOSE near the top of the leaderboard? I would be a charlatan if I said so, but this nascent strength could be a good sign of things to come.
The relationship between crude and the markets continues and the ratio chart comparing WTI to the S&P 500 shows oil being a tailwind for the benchmarks. Truth be told the energy equities have not been as robust as the commodity itself and that may be a concern for investors who focus purely on that group. As technicians we want to see PRICE lead and not lag, but there continue to be some nice set ups in the space, albeit from a low trajectory. For speculators who are deploying capital to the group, as always demand best of breed names and keep your stops tight, in this dull area.
The EWC used to be a good barometer of the energy markets as they neighbor to the north witnessed strong revenues from crude. The ETF is higher 11 of the last 15 weeks and sits just 4% off most recent 52 week highs. Below is the chart of CVE and how it appeared in our 3/22 Energy Report. I usually do not like to look at names below $10 but this one was just underneath the very round figure, and was sporting a nice bullish inverse head and shoulders pattern. It took some time to break above on 4/5, but since has seen a robust rally which rose 8.2% last week and is showing good follow through this week up another 6.9%.