We can all pitch in by using — by being better conservers of energy. I mean, people just need to recognize that the storms have caused disruption and that if they’re able to maybe not drive when they — on a trip that’s not essential, that would be helpful,"
President Bush
While yesterday’s rally in the energy sector looked impressive, I believe it was simply a matter of portfolio managers looking to buy into weakness before quarter end so they can "show" investors that they were smart enough to be overweight energy. Once this buying subsides, energy stocks should fall on "sell the news" trading going into the earnings season. Market participants already know that energy stocks will have solid quarters so there should be little upside surprises. In fact, given the disruptions, several downside surprises are likely.
And given our country’s well thought-out energy policy, its no wonder that energy stocks should continue to top-out in the near term – if every Texas soccer mom stopped taking non-essential trips to practice in their Chevy Suburbans, our oil demand would be cut in half almost instantly.
Of course, what really makes me anticipate a correction of some magnitude is the charts. Tom DeMark and his son have introduced a new indicator called "D-Wave" which combines Fibonacci ratios with Elliott Wave-type analysis. While the technique is still untested, I thought the chart of the OIH was interesting enough to include in my analysis (a thanks to Laeeth for forwarding the chart to me). The current chart of the OIH looks to have formed 5 waves up on the weekly and daily charts. And both the weekly and the daily charts registered DeMark Sequential (TM) sell signals recently.
All indications are that the current rally in energy stocks is stretched and could roll over as the last quarter of 2005 starts. Of course, I have been wrong twice on energy stocks topping, so take my analysis with a big grain of salt.
Hey… Hope you’re keeping well. Can you email me your email address? administrator at contrahour bounces these days. Thanks. Laeeth
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