Last Run Before the Eruption

Crude oil had a wild morning in what seems like has become the norm for violent whipsaws without much progress to show for it. After spiking to green before inventory, Black Gold is now soundly in the red, taking energy stocks down with it in what was already a soft session for commodity-related issues.

The USO, crude oil ETF, is down nearly 3% as I write this. And the XLE, ETF for energy stocks, initially sliced down through its 50-day moving average, a level of clear support buyers have defended in recent months, like a hot knife through butter. 

Going forward, if energy stocks are going to retest or break their summer lows, then it will be in part because buyers failed this time around at the 50-day, thus opening the floodgates to trapped longs hitting the exits as they realize a bottom may not be in the bag, after all. 

With this in mind, major OIH (oil services ETF) AND XLE component, Schlumberger, is as good an indicator as any. Note the daily chart, below, and how pronounced the 50-day (dark blue line) has been as support: If "SLoB" goes, so too will energy stocks as a group, in all likelihood.