Energy Heating Up

As we predicted it might, the QQQQ finally broke its uptrend line during Friday's session. The day must be considered a distribution day due to heavy volume flow. Nevertheless, tops take time to build and we could possibly see another spike higher before any real declines set in. How far the broad market will decline is up for debate, but we have very likely seen as much upside as we are going to see until we first get some form of a correction. When commodities are performing so well, who cares what the broader market is doing though? That is unless you are married to a stock and refuse to shift with the tides as they shift the sand below your positions. Oil prices continue to firm up at their current levels and oil stocks are providing some of the best set ups we have seen in some time. One note to keep in mind related to the energy sector. The sector in general is high beta, which means that reactions to incoming data are magnified several fold. If you keep focused on the bigger energy trend and refuse to pay heed to the day-to-day wild fluctuations that this sector is famous for, there are many opportunities presenting themselves here. On the other hand, if you let the market noise get to you and you narrow your focus too much, then you are likely to get shaken out of a good position right before it makes a strong move higher. When trading this sector it is best to keep stops loose, trading on end-of-day prices rather than paying too much attention to what happens mid day. Note for subscribers: We sent out both long term and short term recommendations today. Please check your email.