NYSE Arca Oil & Gas Index (XOI) Aimed At Key Support

By Jim Donnelly, Olson Global Markets

Although it recovered a bit last week with oversold conditions present on weekly charts, the NYSE Arca Oil & Gas Index (XOI) nevertheless has yet to test key trend line support (that dates back to the low of March 2003) that currently sits at the 1,035 level. Position squaring prior to this weekend’s Greek election may have partly been to blame. Last Friday’s quadruple witching session also may have been a factor. The need to technically “fill a gap” at the 1,151.40 level, which is nearly at hand, may also have contributed to last week’s uptick in the XOI.

Still, a test of the 1,035 level, if it were to occur, would very much emulate similar trading patterns that did develop between June and July of 2010 and between August and October of last year that preceded two separate tests of this same support trend line.

Although near-term upside gains may still occur, there is a reasonably good chance that the XIO will test the 1,035 area before a more vigorous recovery actually takes place.

Interestingly, the correlation of XOI to domestic employment and the equity markets in general is reasonably high. As a result, the XOI may be viewed to some degree as a proxy for the overall economy.

http://www.ogmarkets.com

Leave a Reply