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How the hell to explain this XLE – WTI divergence

Price of Crude Oil (WTI) diverges from XLE since 2013, divergence widens further.

Questions:

  1. How to explain this phenomenon?
  2. Low interest rates?
  3. Does the stock market expect the price of Crude Oil to rise soon or is there some other reason?
  4. Is this a temporary phenomenon? How long is it going to continue?
  5. Is it permanent? Did something change?
  6. What is the best way to trade something like this?
  7. Bet that the divergence will continue by shorting the price of Crude Oil while continuing to go long oil stocks, buy into oil-ETFs?
  8. Bet that the divergence will converge by buying Crude Oil, short sell oil stocks, exchange traded funds?
XLE weekly chart (with WTI overlay) from 2008 to present

XLE weekly chart (with WTI overlay) from 2008 to present | Chart: Tradingview.com

XLE is the ticker code for Energy Select Sector SPDR exchange traded fund. Top holdings include Exxon Mobil (XOM), Chevron (CVX), Schlumberger (SLB) and Pioneer Natural Resources (PXD). Extended list of holdings is carried in the factsheet (as at 30 September 2016).

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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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