Crude Oil Is Trending Above Its ‘Reversion To The Mean’

Richard Suttmeier

The Energy Select Sector SPDR Fund (XLE) broke out above its 200-week simple moving average for the first time since the week of June 5. 2015. The last test of this ‘reversion to the mean’ was tested was during the week of Dec. 16, 2016 when the average was $77.65. This moving average is now $73.72. This ETF is up 7.1% year to date, a leader among the 11 S&P sector ETFs. The S&P 500 is up 4.2% year to date and Nymex crude oil is up 7% year to date.

Here's a link to my coverage of oil services stocks published on Jan. 11.

The weekly chart for Nymex crude oil is courtesy of MetaStock Xenith

The weekly chart is positive but overbought with oil above its five-week modified moving average of $59.39 and above its 200-week SMA of $57.01. The 12x3x3 weekly slow stochastic rose to 93.32 last week up from 91.84 on Jan. 5, as the ‘inflating parabolic bubble’ for oil continues to inflate.

Trading Strategy: Buy weakness to my monthly value level of $56.67, and reduce holdings with oil between my annual and quarterly pivots of $63.81 and $64.53, respectively.

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