WTI and XLE are correlated. Unless WTI is wrong, higher 52-week highs point to XLE breakout when chart is shouting continuation patterns.
Based on these patterns, we are in consolidation phase before main trend asserts itself. However I look at these 3 charts of AUDUSD, AUDJPY and SG30, bullish is not the word to describe.
Bullish and bearish views of XLE-WTI positive correlation. In the bullish view, I see WTI long continuation, XLE Cup and Handle chance to do breakout catch up with underperformance.
AUDJPY is a potential downside continuation pattern currently doing consolidation. At the moment, it is at support from last year’s bottom. A new 52-week low printed first quarter this year suggests further lows. Negative implications to stock indices if previous correlation is still valid.
Add this 3M chart of the same AUDJPY-SIMSCI divergence theme. What’s notable is that AUDJPY appears to be stepping down to a lower range where it traded between 2010 – late 2012 while SG30 remains at lofty levels.
Energy stocks had prospects to become star performers in 2018 based on their January performance as well as performance of WTI. With the US stock correction however a 5-day heatmap reveals Energy (XLE) to be the worst performing sector. Also WTI technicals, performance of SGX-listed Keppel, Sembcorp.
It really shouldn’t matter to a speculator what caused this round of correction/crash. It could be a spike in the VIX complex, rising bond yields or runaway algorithm-trading. If there is a crash somewhere, it would be followed by margin calls which will trigger sell orders in other assets to raise cash.