Taking the Baton

Here's your setup this morning: With Apple and tech lagging out of the gate, the major averages pausing, and crypto plays all over the place, energy stocks are attempting a stealth rotation higher.

For a while now, many a market player and pundit alike have been expecting a great energy sector rotation after years of lagging action. However, and as usual, the market often takes its sweet old time for "can't miss" plays. And energy has been no exception, essentially washing out the exuberance we saw with each bounce attempt earlier this year. 

That sentiment setup is fine by me, since the charts are actually in better shape this time around, albeit with plenty of heavy lifting for bulls yet to do. 

On the XLE, sector ETF for large cap integrated, daily chart below, we can see a narrowing triangle consolidation pattern with price above all daily moving averages. I am looking for a push over $70 now to set in motion a fresh leg higher. Similar comments apply to the exploration/independent firms in the XOP.

The oil service charts in the OIH are not quite as strong as the XLE XOP names, on the whole. But there are some notable exceptions, one of which we are long inside Market Chess Subscription Services. 

As for crude itself, using USO as a proxy ETF it is rather impressive to see "black gold" hold up as well as it has in recent weeks even as energy stocks sputtered and churned. Here, again, there remains considerable work ahead but if we see a positive reaction to weekly inventory number tomorrow morning it may provide ample ammunition for a new leg up.