As always the media attempts to link market price action with some fundamental event. Here it is yet another rumor from the Middle East. The truth of the matter, chart wise, is that important bell-weather ETFs were getting ahead of themselves.

Brent crude oil, the global benchmark was up 1.30%, at $62.2 a barrel in London mid-morning trading. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 1.70%, at $56.08 a barrel.

“There’s been more comments from Saudi Arabia about extending output cuts, which brought that back to the front of [traders’] minds,” said Thomas Pugh, commodities economist at Capital Economics. “But that’s nothing more than what we already knew,” he added.

Wall Street Journal Energy Update Friday November 17, 2017

As always the media attempts to link market price action with some fundamental event. Here it is yet another rumor from the Middle East. The truth of the matter, chart wise, is that important bell-weather ETFs were getting ahead of themselves.

The XES Energy Service ETF six days ago was rebuffed right on its 200 day Moving Average. But gee for the mainstream press, what kind of headline would that make? I am very encouraged on this ETF. It bottomed in August around 13. XES has formed an uptrend channel since then. We now have two highs and apparently two lows since. Each low re tested the 50, 87, and 125 day moving averages, then recovered to the upside. Those three moving averages have converged on the daily chart. This is typical action which sets the stage for a trend reversal. XES is a real bell-weather for the Permian and Eagle Ford areas. Top 10 holdings include Rowan, Noble, Helmerich and Payne and Patterson UTI.

The XLE ETF represents energy producers. But I find it puzzling that Schlumberger and Halliburton, both service companies, are in the XLE and not the XES? Other notables include Exxon Mobil, Chevron, Phillips 66, and Valero. So the action here is representative of the energy shares as a composite group. XLE bottomed in August as well around $61.50. It has bested 200-day moving average support now at $66.50 and recovered each time.

Weekly charts are more important than daily charts. This represents a 5x longer time span. XLE is right up against the 200 week moving average now at $70.14. It pulled back to $67.26. But other indicators remain positive for an eventual break above that 200 week MA.

The XES Service Index has been considerably weaker than XLE. But the 50, 87,and 125 Mas are converging on the weekly as well. Again that usually happens prior to a trend change.

Crude oil has experience a big run from $44 ot $57. But it is up this Friday by $.77 to $55.91. While we don’t use it in Texas, heating oil is really on a tear up form $1.60 in August to $1.90 today.

Natural gas has been range bound. It needs to take out $3.25 to really turn the trend up.

Finally the Goldman Sachs Commodity Index GSCI and the Commodity Research Bureau CRB both remain in solid uptrends.

My bottom line is that the energy complex has completed its bear market begun at the highs of 2008 at $145. The February 2016 low of $25 followed by the Summer 2017low at $42.50 should have registered the final lows. The 200-week Moving Average for WTIC is at $58.65. this last week was the first rebuff at that resistance. It is a matter of time until that resistance is taken out. Surmounting $58.65 will confirm my expectation that a bull market in energy has resumed.

Follow Dennis Elam at http://www.themarketperspective.com