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An unprecedented trend appears to be emerging between the booming energy sector and the turbulent stock market.
Over the past ten trading days, Paul Hickey of Bespoke Investment Group has discovered that energy has never been better as the S&P 500 trades lower.
“The energy sector is up nearly 17% and the S&P 500 is down,” the independent research firm’s co-founder told CNBC’s “Trading Nation” on Tuesday. “This is an incredible situation we find ourselves in.”
It highlights the relationship in a special graph with data going back to 1990.
“You have a big disparity where one end of the elastic is stretched to the left and the other is stretched to the right,” he noted. “When you’ve seen this happen, you tend to see a mean reversion. “
He also mentions that the Energy Select Sector SPDR fund has risen by 3% in three of the last four trading days. This is a long-term uptrend, according to Hickey, which has only happened a few times over the past two decades.
“After previous periods of similar strength in XLE, the sector saw short-term profit taking, but a year later it was higher than five times,” Hickey wrote to investors this week. “The performance of the stock market as a whole following similar surges in the energy sector has been uniformly weak in the short term, but uniformly positive six and twelve months later. “
On Tuesday, the XLE rose 0.58% to close at $ 55.04, and is up more than 13% over the past month.
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