Just about one month ago, I wrote about energy. At the time, I noted crude oil was pounding away at $67 and everyone hated energy. I noted that the oil services exchange-traded fund (OIH) , the high beta group of energy, was making higher-lows and had been for months, as had been the exploration ETF (XOP) .
Most did not care. They only wanted semiconductors and tech. It was non-stop tech back then. Fast forward to today, and, as I showed yesterday, when we look at a chart of energy relative to the semis it's been a one way trip in favor of energy since early June. Yet, on Monday, it was as if investors discovered oil.
Folks were gushing over energy. OIH is up over 20% since I called it a positive divergence in late June, but it is up over 30% since early June. And now they want to get excited over energy.
Now I ask you to look at a chart of gasoline, not crude oil. It almost looks like a tech stock -- well before tech stocks started churning and slumping. I grant you I am a terrible momentum trader, but would you chase that? I surely wouldn't.
Oh, and I might as well note that the Daily Sentiment Index (DSI) for gasoline tagged 92 on Monday.
I must admit I look at that chart and think to myself that since I have returned from my vacation, everywhere I turn, I see or hear someone saying inflation has peaked. I am no expert on inflation; I don't even play one on television -- but that spike in gasoline does not scream to me peak inflation, but rather be on the lookout for another push upward.
Of course this spike up in gasoline could be temporary and all will be well in inflation land, but I do find it curious that the word of the day seems to be "peak inflation" at a time gasoline has spiked nearly 25% in a month, and the highest since October.
In fact, if you want to watch the impact of the rise in energy, then look no further than the chart of of the ETF for airlines (JETS) . It's flat in July. A break of $21 would surely be something the travel bulls don't want to see.
We also saw little change in the indicators on Monday. We remain overbought and the only real change was that Nasdaq had two more new lows than new highs. That's a change, because I honestly find it so hard to believe that Nasdaq has run so far and a 2%-3% pullback immediately has more new lows than highs. That is not very typical.
