Oil is catching bids today post the latest news out of the Mid East. We still don’t know who was involved in the latest Persian Gulf attacks, but one thing is sure, oil is +4% on the news, extending the gains intraday.
Previous June lows held and oil could be making a short-term bottom formation. This is the second bounce over past sessions. We don’t expect oil to start a new trend higher imminently, but price action is telling us there is support here. 55 is the first bigger resistance area to watch.
The energy ETF has traded horribly bad for a long time. The negative trend channel is intact, but we are asking ourselves if the tanker attack could be the short-term trigger for the XLE US to revive. Things could get interesting to the upside should we take out the negative channel, i.e. a close above the 62 ish area.
With the sharp SPX bounce over past sessions, we ask ourselves if a market neutral spread with long XLE US vs short SPY US could be setting up for an interesting neutral trade.
The XLE vs SPY spread has gone one way only for a long time…
Source, charts by Bloomberg