06.19.22 | Outflows in Energy Stocks Continued on Friday

DeMark Indicators

By June 9, D-Wave 5 which requires a 34-price bar high … completed. Coinciding with this, DeMark suggests that professional investors often recognize that long positions no longer posses a favorable risk/reward perspective and anticipate a trend reversal.

D-Wave 5 signals are strengthened by the presence of other exhaustion indicators. In this context, we have a completed Countdown 13 and a perfected Sell Setup 9. Sell setup perfected one day after printing the completion sequence … marking June 7 as XLE’s high.

DeMark has also emphasized the importance of looking for multi-time frame indications of exhaustion.  Here, too, we have confirmation of a completed rally and sell signal. (below)

Further Outflows Friday

With the exception of Occidental, here too, we see aggressive selling in energy stocks whose YTD performance has been stellar.

Institutional Investors Prefer Occidental Petroleum

While the world’s thirst for oil is unlikely to abate anytime soon, institutional investors have exhibited a distinct preference for OXY. Notwithstanding this pattern of accumulation, OXY is retracing and some might consider this buying on strength to be a contrarian indicator.  DeMark indicators have marked sell signals and are beginning D-Wave and Sequential setups for a future buy.

High Oil Prices, Strong Dollar, and Recession

While high oil prices can certainly contribute to recessionary pressures, a decline in global oil demand … related to high prices at the pump … may only (temporarily) weaken growth.  As there are multiple inputs into this equation which are linked to a myriad of geopolitical events that impact oil prices … a collapse in oil prices would be a dubious assertion.  Outflows in the context of profit taking appear more likely.