XLE Energy Daily Chart H&S Gaps ISM Trade

XLE energy sector daily chart with lots to see technically. Note the blue arrows, what do they show? Keystone will tell you at the end of this commentary. The end of February shows the first chinks in the armour with a rising wedge, overbot conditions and negative divergence creating the red spank down.

Price comes up again for the April high, due to the Middle East turmoil and how oil and energy will be perceived as the currency of the future, and prints a higher high. But negative divergence with the RSI and MACD wanted to see another spank down, which occurred, the purple lines, but the pink lines show long and strong profiles for the other indicators. That means price will want to come back up again to test those highs, and it did with the green lines. Note early May how price came up again but all indicators were negatively diverged so that marked the top once again.

Note the teal circle showing an island reversal in April. The early May high placed a head and shoulders patttern with a neck line at 73. In May, the falling black wedge and positive divergence, albeit slight not strong divergence, bounced price. The BPENER chart had reversed to move back up over 6% verifying the bullish move lately as well.

This leaves us with two doji candles the last two days indicating a potential reversal. The 20 MA is under the 50 MA, bearish. Price sits on top of the 50 MA now making a decision. Only one gap remains above at 79-ish but the gaps below are too numerous to highlight. They all need filled at some point. This bounce should be short-lived. Down from here, or, fill the 79 gap then down. The 79 gap fill would close out all business above and price will no longer have a reason to go back up. The head and shoulders should play out targeting 65, probably as the Autumn leaves fall.

Oh, the blue arrows? They show the ISM trade the professionals play each month. See how energy moves up the last few days of each month into the first of the month then XLE sells off? The trade is buying energy, XLE or your fave energy play, the last few days of the month, and sell on the ISM data release the first of the month.  Thus, this gives you soemthing to watch tomorrow and note XLE's reaction.  If this trend month after month is broken, take it seriously, since it will foreacast bearishness ahead for overall markets.  For tomorrow, watch to see if the typical ISM day sell off occurs.  If not, it is of no matter, the 79 gap will be filled instead and close out all the business above, opening up the way to downside with a failure of the neckline and a move to the 65 H&S target.

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