A Clear Point of Attack

In recent videos for Members, a few points repeatedly came up: The energy sector had a few chances of late to roll back over again to fresh lows, but instead found buyers just in the nick of time. 

In addition, as a corollary to that first point, the XLE (ETF for the energy sector) had not tested its 200-day simple moving average (yellow line on daily chart, below) since 2014. This is quite a long time to go without a precise test by price of the 200-day, and speaks to how powerful the downtrend had been in energy stocks. 

Still, at this stage, shorting the XLE simply became too risky, given that an eventual 200-day moving average test was becoming more and more likely, as markets tend to refresh that relationship every few years when they go too long without a test. So, a squeeze up to the 200-day became a clear point of attack by bulls against shorts leaning down here. 

And, so, we are seeing some pain on the short side today for energy bears, as the XLE did, in fact, precisely test its declining 200-day moving average earlier today. Clearly, the rotation into the energy/materials/mining complex is still playing out, while semis lag and a few notable Nasdaq leaders act lethargically. 

At issue now is the sustainability of this rotation, perhaps mirroring what we saw in the spring of 2008. I will flesh out that topic for Members in my usual Midday Video.