11Oct11:37 amEST

The Energy/Materials Bear Market is Dead; Long Live the Commodity Bear

It is hard to fathom that Exxon-Mobil, a Dow component with a $293 billion market cap, is trading at a level now that it was during the depths of the 2008 bear market. But that is where we are, not just with XOM, of course, but looking across the entire energy complex (OIH, XLE, XOP ETFs) as well as most miners/materials, precious and otherwise (including steels) in the XME ETF. 

Exxon currently sports an attractive 5% dividend and is technically bouncing off the mid-$60s--Right where it needed to if we observe the updated monthly chart, first below. 

A few weeks back, recall a blog post where we noted XOM was at one of those moments in time where it would either take the entire energy patch down with it, or find support and save the day. On some level, XOM may very be at the same type of do-or-die leadership spot that Berkshire Hathaway was for equities as a whole back in March 2009. 

Clearly, higher rates and a perceived reflation/inflation trade in the early stages may be the reason, in part, for the energy/materials rally today. Eventually, I expect the precious miners to catch back on, though that is a topic for another blog post. 

In the meantime, note how the XLE sector ETF, as a whole, is confirming the bullish RSI weekly chart (second, below) divergence from the summer. This has been a long time coming, in other words, and the bottom thesis is categorically not based on one single session of strength. 

While I have my eyes on the housing strength, and continue to look at fresh angles to play that sector, the non-precious materials space as well as energy seems to be begging for increased coverage from traders looking for asymmetrical risk-to-reward ratios. And you can be sure we will be following up on this thesis for Members this weekend and beyond, and in subsequent blog posts here as many elements seem to be met for a long-term bottom slowly but surely coming into clear view. 

A Good Show at PNC Tesla's Chart on Autopilot


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