Energy Chart Request

Here's Energy/XLE

 XLE 15 min 3C

 Friday's gap down produced a bit of a volume surge, this is something to put in your tool box, very commonly a volume surge, especially on a positive divergence, whether it be 3C, RSI, MACD (depending on the timeframe and trend) and especially on a reversal candlestick like a hammer, is very often a short term turning point. Today the gap, as is usual for this market, has been filled.

Here are some examples on XLE's hourly chart, but this applies to most stocks that have fallen and hit a volume surge, it's sort of like "mini-capitulation"

On an hourly chart, there are several volume surges on pullbacks or a drop like Friday, accompanied by "Hammer" candlesticks or at least a long lower wick which may not qualify for the term "hammer" but has the same effect.  The extent of the volume surge, the extent of the pullback and the timeframe in which it occurs, all are contributing factors to what the reversal will look like, obviously the more extreme the capitulation, the better the reversal, but these tend to be short term in nature. If you saw this on a weekly chart, it may have more significance then a short term reversal, especially if it is afer a prolonged down trend or bear market.

Other then that, The correlation between a weak dollar and crude prices came in to play around 12:30-1:30 as the Euro gained (euro in red, XLE green) and you can see they moved in lock step. Toward the close, if the Euro continues on this path as it is diverging and weakening, it will be hard for Energy to maintain momentum and may very well start to reverse.

Being the Euro just broke an important support zone, I would suspect it will remain moving down for awhile longer through the 4 p.m. close, but more importantly, likely overnight and given the market's correlation with the Euro as well as the Market Update and 3C stance, this of course would have negative implications for the market. That being said, who knows what or when the next European rumor comes out.

 EUR/USD 5 mi longer term breaking intraday support and moving toward closing the gap.

A close up view of the same chart.

Here's the inverse correlation between the Euro and the $USD, a weak $USD is good for stocks and commodities in general, that means a strong Euro is good for them, a strong $USD/weak Euro puts pressure on stocks and commodities.

Euro in red, $USD in green, the trend all day has been subtle, but in the last 10 minutes has become more pronounced.

The other thing to note is that XLE has performed about the same as the SPX today and given the car bombs at the Israeli embassies today, Energy "Should" have outperformed on increased uncertainty about geo-political risks, it did not, that is a hint in and of itself about the health of the energy sector.