Our concerns about Energy have proved to be well-founded.
(Premium) Running Out of Gas
Energy stocks have gone nowhere for 15 years.
(Premium) April Energy Outlook
The Energy sector faces significant headwinds, which skews the risk/reward in favor of bears. For months, we’ve been pointing at tough resistance and waning momentum on both an absolute and relative basis. The sector has been unable to surpass its 2014 highs, and weekly momentum failed to get overbought on the most recent rally. At the very least, we think it takes some time to work off that bearish momentum divergence. At the very worst, prices revert back to the 200-week mean.
(Premium) March Energy Outlook
The Energy sector turned in a modest performance during February, outperforming during the first half of the month, and then lagging during the final weeks.
February Energy Outlook – Unlocked
We downgraded the Energy sector shortly after publishing our December outlook. Bearish weekly momentum divergences on both the relative and absolute charts had us cautious about the future of the sector.
Nothing has changed. Except perhaps that we’re even more concerned about the future of the sector.
Remember, momentum divergences don’t always lead to trend reversals, so we’re ready to reinstate Energy’s overweight rating should prices resolve higher. For now, though, we see weakness as a more likely outcome.
The sector is dealing with resistance from the 2014 highs. For those of you that have been around that long, 2014 was the year that oil prices began a huge, multi-year decline. That former peak has some memory.
Here’s a chart that screams trouble. The Integrated Oil & Gas industry just put in a failed breakout above its November highs. What’s more, momentum failed to even get overbought on that rally. You’re probably tired of reading the same words over and over again, but we’ll say it again. From failed moves come fast moves in the opposite direction.
Crude oil breaking below 70 could be the trigger that sends the Energy sector into a tailspin.
One bright spot has been Hess, which recently broke out above its 2008 highs. We can still target 200 if the stock is above 140, but if it’s below those ’08 highs, we want to take note for potential weakness in the rest of the sector.
Click on each section below to see the rest of our February outlook:
Fixed Income, Currencies, and Commodities
Communication Services Sector
Consumer Discretionary Sector
Consumer Staples Sector
Energy Sector – UNLOCKED
Health Care Sector
Information Technology Sector
Real Estate Sector
(Premium) January Energy Outlook
We downgraded the Energy sector shortly after publishing our December outlook. Bearish weekly momentum divergences on both the relative and absolute charts have us cautious about the future of the sector.
(Premium) December Energy Outlook
We’ve been bullish on Energy stocks relative to the S&P 500 for awhile now, but that run could be coming to an end. A major bearish momentum divergence is shaping up on the weekly chart.
(Premium) November Energy Outlook
Energy solidified its position as the best performing sector on the year after a strong October. We absolutely do not want to be underweight this sector – it’s a freight train and we don’t want to stand in the way.