There has been a lot of wild action in the energy sector as of late, with much of it favoring the bears for the first time in a while.
Within the last hour, the US Energy Information Administration reported that crude oil inventories increased by 1.7 million barrels last week, compared to a consensus estimate of a 1.2 million decrease. This announcement has put considerable pressure on crude oil prices once again in morning trading, with the commodity now down 20% from the high of about a month ago. Not surprisingly, energy sector stocks are falling in tandem with crude.
A look at the weekly chart of XLE, the de facto energy sector ETF, shows that the recent correction in energy stocks is comparable to what transpired at the beginning of the year. In fact, XLE bounced off of the 100 week simple moving average in January and may have done so again yesterday, when it touched 69.83 – just above the current 100 week SMA of 68.79.
I believe there is a good chance XLE made an intermediate-term bottom yesterday, but it will take a convincing rebound in the second half of today’s session for me to want to act on that opinion.