Energy takes the lead as money rotates out of tech
For the first time since spring, energy topped the weekly sector table while technology finished last. One week is not a trend, but the breadth behind the move was better than I expected.
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The headline number for the index was flat this week. Under the surface it was anything but.
The rotation in one picture
Energy led, technology lagged, and the middle of the table barely moved. That is the classic shape of a rotation rather than a sell-off: money moved sideways, not out.
Why I think it has legs (for now)
- Breadth. It was not just the two majors. Refiners, services and the mid-cap producers all closed the week up, and most of them above their 50-day averages.
- Volume. XOM broke out of a two-month range on the heaviest volume since June. Breakouts on volume are the ones I trust.
- Positioning. Energy has been the most under-owned sector all year according to every survey I follow, so there is room for this to run before it gets crowded.
What would prove me wrong
A quick reversal back into the range on XOM and CVX by mid-week. Failed breakouts in a hated sector tend to be sharp, and I would rather be stopped out small than argue with it.
I have no position yet. I’m watching for a pullback toward the breakout level early next week.