Key Levels For Energy Bulls And Bears
In a February 3 tweet (below), we noted that market participants could gain valuable insight into economic dynamics by keeping an eye on energy stocks (ARCA:XLE).
Thus far, energy stocks have been unable to break the 82.10 level noted two weeks ago.
If XLE can clear the 82.10 to 84.62 barrier, and hold above that range, the odds will improve relative to “scenario three” as described in detail on January 27.
Myth: Stocks Can’t Do Well When Energy Is Weak
The point of the exercise is not to assess bullish and bearish odds for stocks, meaning stocks can go up within the context of a weak energy sector (see table below). The fate of energy stocks can assist us with the relative attractiveness of inflationary assets (e.g. energy) and deflationary assets (bonds).
Image from jinterwas via Flickr (image altered).