OPEC PRODUCTION CUT PUSHES OIL SHARPLY HIGHER -- ENERGY STOCKS LEAD MARKET HIGHER -- OIL SERVICES ETF ACHIEVES BULLISH BREAKOUT -- ENERGY LEADERS INCLUDE DEVON, MARATHON, AND MURPHY OIL -- RISING BOND YIELDS BOOST FINANCIALS WHILE UTILITIES FALL
OIL SPIKES ON OPEC CUT... The agreement by OPEC to cut oil production by 1.2 million barrels a day has pushed the price of crude $3 (7%) higher in today's trading. The spike in oil is giving a huge boost to energy stocks which are leading the market higher. In fact, five of the day's stop S&P 500 percentage gainers are energy stocks. Energy ETFs are having a good chart day as well. Chart 1 shows the Energy Sector SPDR (XLE) trading at a new sixteen-month high. The XLE had already achieved a bullish breakout earlier in the month. Oil service stocks are achieving their bullish breakout today. Chart 2 shows the VanEck Vectors Oil Services ETF (OIH) rising above a "neckline" extending back to last November. Its relative strength ratio (top of chart) is nearing an upside breakout as well. The spike in oil is having a spillover effect on the rest of the stock market which is hitting new highs. For one thing, the spike in oil is pushing bond yields higher which is boosting financial shares (like banks, brokers, and life insurers) while pushing bond proxies like staples, utilities, and REITS lower. Energy exporters like Canada are also having a strong day.
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Chart 1
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Chart 2
ENERGY LEADERS... Three of the biggest percentage gainers in the S&P 500 are shown below. Chart 3 shows Devon Energy (DVN) climbing to a new high for the year. Chart 4 shows Marathon Oil (MRO) trading over $17 for the first time this year. Finally, Chart 5 shows Murphy Oil (MUR) turning up as well. There are lots of others. The simplest way to take advantage of the uptrend is via the two energy ETFs shown above that offer exposure to the entire sector or oil service group. In addition to strong energy and financial stocks, copper and steel stocks have pushed the Materials SPDR (XLB) to a new high. The reflation trade is still very much in play. Except for gold. A rising dollar and rising yields continue to push gold assets lower.
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Chart 3
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Chart 4
