Leadership the last 6 months has been suspect for sure (as seen on the chart below), as very defensive sectors have led the way with the top 3 groups dominating the landscape. Perhaps that leaves room for technology and financials to have a surge into year end, as momentum names could possibly find some footing. Down at the bottom of the list, lagging by 10% behind the second worst group, is the XLE down sharply, and the only space in the red out of the major 11 S&P sectors. The XLE rose by 4.4% this week, its best WEEKLY gain in nearly 8 months, and it nearly doubled its next closest competitor in technology which rose by almost 2.5%. One can count the number of sessions the ETF has CLOSED above its 200 day SMA, a line which has been flatlining now for nearly a month. Prior to that is was downward sloping since last October. It now trades roughly 3% underneath that secular line, and there is no certainty that it will climb above. But this space which has finished the year the worst or second worst group of all the major S&P sectors 4 of the last 5 years, could rally another 10% from here and still end up in that position. Dead cat bounce on arrival?
The big integrated energy names have seen bifurcated action this year. CVX has shown decent relative strength off 7% from most recent 52 week highs, while peer XOM is down a more noticeable 17% from its recent yearly peak. Below is the WEEKLY chart of BP, which is 13% off its most recent 52 week high, but this week soundly outshined both of the aforementioned names. It advanced 5%, while XOM and CVX added 2.3 and 3.4% respectively. Round number theory comes into play for BP, as the 40 figure has been resistance since mid July, but that potentially may be about to change. If it can clear that level, it puts the focus on an add on above an ascending triangle. A dividend yield well above 6% makes this name an attractive candidate in the energy patch. It will REPORT earnings next Tuesday before the open.
Select pipeline plays have been outperforming the energy complex, and of course along with the capital appreciation comes big dividend yields (something investors around the globe are obviously clamoring for). Below could be a good example of that with the chart of OKE, and how it appeared in our 10/16 Energy Note. This week ended its first 4 week losing streak in nearly 2 years gaining 3.4%, and now on an impressive 7 session winning streak. Its 200 day SMA has been a nice cushion dating back to February of this year. A decisive move above its 50 day SMA can start the right side of a potential cup base, which would have an eventual add on pivot of 77.31.