ENERGY SURGE SHORT-CIRCUITS MARKET BOUNCE -- SOFTER DOLLAR BOOSTS COMMODITIES -- TIME TO RE-ENERGIZE

ENERGY MARKETS SURGE ... The entire energy complex is rising sharply today -- paced by record highs in gasoline and heating oil. Crude is trading 1.64 higher at 55.63. Chart 1 shows that the uptrend in crude is still intact. The energy complex is leading a strong rally in the CRB Index as well. The CRB is up 4.32 points with all but one of its components in the black. The three top gainers are heating oil (+3.5%), crude (+3%) and natural gas (+2.9%). [Gasoline isn't currently included in the CRB Index]. Weakness in the U.S. dollar is also giving a boost to gold and other commodities. That's also helping energy and basic material stocks which are the day's strongest groups. The surge in energy, however, is short-circuiting the stock market's attempt to rally. Energy stocks look especially strong.

Chart 1

OIL SERVICE LEADS OIL PATCH ... Within the energy sector, oil service is the day's leader. The daily bars in Chart 2 paint a positive picture of the Oil Service Holders (OIH). Yesterday's upside turnaround on very heavy volume was a positive sign -- followed by today's upward price gap. That also puts the OIH safely back over its 50-day moving average. The 9-day RSI line didn't quite reach oversold territory, but is climbing back over its mid-point at 50. That's a sign that the recent downside correction has probably run its course.

Chart 2

OIL SERVICE LEADERS ... Transocean (RIG) is an oil service leader. After bouncing off its 50-day line, the stock is close to a new 52-week high. Halliburton has been in more of a triangular consolidation than a correction. That makes it a potential leader. Baker Hughes is the biggest holding in the OIH. That makes it worth watching. The good news is that the stock is bouncing off major support at its 200-day moving average. That qualifies BHI as one of the better values in the oil service group.

Chart 3

Chart 4

Chart 5

ENERGY SECTOR SPDR BOUNCES OFF 50-DAY LINE... A broader measure of the entire energy sector -- the Energy Sector SPDR (XLE) -- has acted even better than the OIH. Its daily chart shows the XLE turning in an upside reversal day yesterday at its 50-day moving average -- and on very heavy volume. That's a good sign that the recent pullback has been completed. The 9-day RSI line didn't quite reach oversold territory, but the daily stochastic lines did. Chart 7 shows Exxon Mobil, which is the biggest holding in the XLE (23%). XOM is also bouncing off its 50-day moving average.

Chart 6

Chart 7

TIME TO RE-ENERGIZE... A number of you have asked if this is a good time to put some money back into energy or to add to existing positions. My answer would have to be yes. It looks to me like the energy correction has run its course. Unfortunately, that's not good news for the rest of the market which is struggling today. One of the reasons that I have a longer-term bearish outlook on the stock market is the fact that my longer-range outlook for energy remains bullish.