Not Quite the Memorial Day Massacre

Crude oil is finally seeing a bit more material weakness today, for the first time in a while. I still view the $10.80 level on the USO (ETF for crude oil) as being the logical downside level for bulls to now defend after they prevailed for a base bottom upside breakout in April. 

As we know, crude bulls overcame the lack of a deal in Doha and plenty of well-reasoned by likely priced-in bearish arguments. 

But now that plenty of crude shorts have been effectively run over, a consolidation in May makes sense, perhaps all the way into Memorial Day Weekend before we get a feel for how energy will perform in the heart of summer. 

Regarding energy stocks, some risk factors include keeping close tabs on firms like CHK KMI, as well as the general HYG JNK ETFs. 

And the XLE, ETF for the energy sector at large, offers good perspective, to boot. 

On the XLE weekly chart, below, a fairly controlled pullback into Memorial Day would set up a textbook inverse head and shoulders bottoming formation after a multi-quarter energy bear market, with $70 eventually needing to be cleared to confirm the bull thesis. 

Overall, I am more impressive with miners and steel plays in 2016 than I am with energy, in terms of possible multi-year bottoms. 

But even energy bulls at this point should probably be rooting for a pullback and consolidation to reset some of these charts--Just not a Memorial Day Massacre.