The Energy ETF (XLE) has lagged the broader market, and now it has gapped down through all major support on its daily chart, which could be a bearish omen of things to come.  Let’s take a closer look.

Notice that the XLE failed to break above its February high like some other ETFs did (like XLF – Financials and XLK – technology).  This is a sign of relative weakness both to other sectors and to the S&P 500 (which ‘tied’ its February high).

Here are some other quick chart components to see:

1. Negative Momentum Divergence
2. Negative Volume Divergence
3. Break-down out of Rising Trendline
4. Break-down out of Triangle Consolidation
5. Breakdown through the confluence of 20 and 50 day EMA
6. Subsequent “Breaking” of the Cradle Confluence

Without going into detail on all of these, make at least a mental note of these and that the future pathway seems to be to the downside.

As a caveat, we all deal in probabilities, so there’s no guarantees price will fall to challenge lower levels, but the odds are stacked against Energy Bulls now.  Also, note that Crude Oil itself will almost certainly suffer if we get a continued broader market swing down.

Corey Rosenbloom
Afraid to Trade.com

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