Energy Assessment:
Even though energy is the best-performing major S&P sector YTD it will not be immune from the overall market selloff. Round number theory, not surprisingly played a role with the recent weakness in the XLE. It has set up a bull flag formation just below par, and last Friday was actually above intraday but ended up CLOSING below it and that was an ugly reversal. Monday followed through lower to the downside and we know from FALSE moves come fast ones in the opposite direction. Below is the WEEKLY chart of the XOP, and it is going to be tested this week and as it may not perform on an absolute basis I believe it will continue to outperform on a relative basis until the nascent softness subsides. Its daily chart perhaps gave a hint like the XLE the day before the ugly reversals Friday with the hanging man candle last Thursday. Select coal names, classified as energy, showed some decent relative strength Monday. HCC is holding just above a 62 bullish inverse head and shoulders breakout pivot, which carries a measured move to 72 which would put it above the encapsulated cup base shown.