A Slow Day of Musical Chairs

Small caps, banks, and biotechs are finally pausing today while tech, utilities, bonds, and energy stocks sustain a bounce for a bit of the reversion we had been noting for Members seemed likely this week. 

At issue in this note is whether the move in energy has legs, something beyond a mere oversold bounce which is doomed to turn back lower. 

One of our keys for the energy sector is the HYG, ETF for high yield corporate bonds containing many energy firms, some of which have debt issues worth tracking. 

On the HYG daily chart, below, aiding the bull case for a bit more meat one the bone to this rally would be the bullish engulfing candle yesterday (arrows to the right) off the 200-day simple moving average, followed by upside follow-throuhg today. Note HYG bounced hard off the 200-day back in late-June. 

And thus far bears appear to have stumbled again right when they had a chance to crush energy for a serious breakdown. 

Beyond shippers like DRYS EGLE and their rallies, the likes of PBR and CVX are acting like energy is actually doing just fine and not on the verge of another deflationary meltdown.

Going forward, as long as HYG holds the 200-day it is tough to get too bearish on energy given the way buyers responded yesterday and are taking the initiative further today.