Uneasy Lies Energy's Crown

The S&P 500 Energy sector fell 2% yesterday, its twelfth decline of at least 2% this year. That ties Technology and Consumer Discretionary for the most among all sectors, despite Energy leading the pack in YTD performance. The decline snapped a seven-day winning streak, just one day short of the sector’s longest this year, an eight-day run that ended on January 30. Since 1990, Energy has recorded only 16 winning streaks longer than seven days, compared with 25 seven-day streaks, including the latest one.

During its recent winning streak, Energy rallied 6%, further cementing its position as the best-performing sector YTD. Real Estate, which we highlighted yesterday, was the next best, posting a gain of 3.5%. In contrast, the S&P 500 sank more than 2% over that span. Notably, Communication Services fell 11%. Consumer Discretionary, Technology, and Financials also were in the red.

Energy may lead every other sector by more than ten percentage points this year, but its path to the top has hardly been smooth. The sector peaked on March 27 and has gone 82 trading days without setting a fresh high, leaving it nearly 7% below that level. The recent winning streak brought Energy back to a key resistance line connecting its lower highs since March, but yesterday’s 2% slide was a rejection at that resistance. Even after the decline, the sector is comfortably above its 50- and 200-DMAs. A break above the downtrend line would clear the first major obstacle to a retest of the March high, while the 50-DMA offers the first notable support if yesterday’s reversal develops into a larger pullback.