Exxon, Risk On!

Exxon earnings this morning look to have lit a fuse (a much less damaging one than the Standard Oil fire in 1900 in my original hometown of Bayonne, New Jersey, pictured above) under the entire oil sector, with big XOM up more than 6% as I write this. 

For a while now, we have focused our long watchlist ideas with Members on energy and some agribusiness plays, which are also have a fine morning session themselves. 

But with respect to energy, the issue is whether the XOM earnings report reaction is the excuse or catalyst (it does not matter much to me) for a bonafide sector breakout which sticks. 

On the OIH ETF daily chart, below, which is composes of oil services stocks like SLB, we have a pretty solid bullish technical setup, with the light blue line showing basing at prior highs from last Halloween. Without much nefarious sell volume since then, you would have to give bulls the edge for the breakout here, especially with the resilience oil itself has shown of late. 

And despite how badly the transitory-turned-peak inflation crowd wants to talk oil and oil stocks lower, they may be proven cannon fodder for the sector to propel higher as the inflation theme takes hold in 2022. 

Another point worth noting: Even if the recent relief rally in growth stocks and tech fails, we have seen prior inflationary cycles where the commodity name can continue higher for a good while even as tech moves lower. One recent example would be Q1 and most of Q2 back in 2008.