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“Even if there was a hand, it was the hand of God.” – Diego Maradona
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It’s looking like another sluggish start to trading today as the market looks to digest the sharp gains from the last few weeks. There’s no economic data to speak of but higher-than-expected CPI data in the UK is weighing on global sentiment tied to inflation. While not an economic report, Powell’s testimony in front of the House Financial Services Committee at 10 AM will be a big market driver today.
After acting as a flare for a dark market in 2022, Energy has been an outlier again in 2023 but this time to the downside with the sector declining over 10%. The last week has seen more of the same with Energy falling more than 2.5% while no other sector is down even half of a percent. As shown in the snapshot below, Energy tops the list in terms of weakness as it is down more than any other sector YTD, down the most over the last five trading days, and is further below its 50-DMA than any other sector (-3.83%).
What’s interesting about the weakness in Energy stocks over the last week is that it has come as energy related commodities have rallied substantially. As shown below, the ETFs that track crude oil (USO) and natural gas (UNG) have rallied 6.1% and 9.8%, respectively.
While performance over the last week has been divergent, whether you look at six-month price charts of energy-related stocks or commodities, they all look like a mess with all of them much closer to six-month lows than six-month highs. Perhaps the only positive thing to say is that up until this point, they haven’t made lower lows. You could even say that the chart for UNG looks similar to the way some bombed-out growth stocks looked in late 2022, although given the way the ETF is structured, holding it for extended periods of time is likely to result in an enormous amount of decay.
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