Market Conditions at the Open, Relative Strength in Energy, and Premium Stock Picks from Oil Services and Exploration & Production
StockCheatSheets.com is a bullish trend-following system that works best in rising markets. Entering its seventh month, the bullish rally in the S&P 500 US large-cap stock index has plateaued. Price has fallen below its 10-day exponential moving average, which has been converging with a still-rising 40-day EMA. The futures are starting the day slightly higher as the index attempts to find support there as I start work on this article at 7am Eastern.
From our weekend work, the parent indexes Russell 3,000 and S&P 500 (expressed below as ETFs RUA & SPY ) are in correction. The 5-day EMA’s for the two broader market indexes have both crossed under their 20-day EMA’s, but for now, intermediate daily and weekly trends (10 EMA’s above the 40 EMA’s) are still in tact.
Sector vs. Broad Market Discrepancy
Even though the energy sector ETF (XLE) and its sub-sector ETFssdx (XOP and XES) are outperforming both the broader market indices (RUA and SPY) and other sectoral ETFs from our weekend analysis, the broader indices are showing signs of correction. This divergence means that while the energy sector shows strength, the overall market health is weakening. A weakening broad market can exert downward pressure on all sectors, including those currently performing well, as broad market trends often have a significant impact on investor sentiment and capital flows.
As we share our premium stock picks in XES and XOP below, keep the risks of mixed market conditions in mind.
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