Back on July 3rd we discussed how there were bullish developments beginning to emerge in the energy sector. Even though XLE managed to print a lower low there continue to be bullish developments that signal the low is nigh.
XLE breached the declining 50 day MA on day 8. However XLE proceeded to break lower to undercut the day 33 low only to form a bullish reversal on Friday. XLE has since formed a swing low and delivered bullish follow through which signals that Friday hosted either a shortened 11 day, DCL or a stretched 44 day DCL. The bullish divergences on the oscillators align with a DCL printing on Friday. At this point we need to see a clear and convincing break above the declining 50 day MA to confirm that the undercut low hosted the daily cycle low.
Natgas also formed an undercut low last week.
NATGAS broke below the previous DCL last Wednesday. In real time this looked as if Natgas formed a failed daily cycle. But Tuesday’s rally makes it look like last Wednesday hosted an undercut low and extended the daily cycle out to day 54. A clear and convincing close above the declining trend line will confirm that Natgas is in a new daily cycle.
While oil did not form an undercut low, it did look like it was in trouble last week.
Oil was soundly rejected by the declining 50 day MA last Wednesday. Coupled that with oil closing below both the 10 day MA and the lower daily cycle band on Friday made it look as if oil was forming left translated daily cycle. However, oil printed a reversal on Monday and then delivered bullish follow through forming a swing low on Tuesday. That allows us to construct a daily cycle trend line. As long as oil remains above the daily cycle trend line then it will continue to develop bullishly.