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Much has been said about the strength of the oil stocks of late, even in the face of a weak crude market. Generally, this type of divergence does not occur as the chart shows. There have been three instances on this chart where the Oil SPDR (XLE) has outperformed crude since 1999.

In each instance, the following months saw a correction of the XLE in varying amounts. It makes you wonder if the buyers of energy stocks are blindly ignoring this at the moment.

Interestingly enough, I had argued that the fundamentals support a bounce in crude when in fact the bounce occurred in the energy stocks. Go figure. Anyhow, I believe the energy stocks have become too stretched here and should migrate back towards the crude barrel.

And a quick note on natural gas prices. Thursday's report was bullish in my opinion but perhaps the cold weather trade, combined with the fact that we are stalled at the $8 resistance, has traders taking profits. I avoided the complex last week after getting buried on a short but look to re-enter sometime soon.

Related Stocks: Chevron (CVX), ExxonMobil (XOM), BP (BP), ConocoPhillips (COP)

XLE vs. WTIC 7-yr chart:

Crude Oil Prices

Source: Buyer Beware: Oil Stocks Headed for a Correction