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XOI Meets Our 1700 Upside Target

Posted on: Thursday, June 19th, 2014

The chart below shows that the AMEX Oil Index, which is now known as the ARCA Oil & Gas Index (NYSE: XOI), met our 1700 initial upside target this morning, first mentioned in our January 25th 2013 report entitled A Strengthening Energy Sector Is Positive For US Stocksto capture a 370 point, 28% advance in just about 17 months.

XOI Weekly Since 2009

XOI Weekly Since 2009

From that report:

Quarterly momentum metrics and our own sector-related asset flow data concur that the current June 2012 trend of relative outperformance by the Energy Sector is uncompleted. This directional bias is corroborated by recent bullish breakouts from almost 2 years of sideways congestion in the AMEX Oil Index (XOI) and the Energy Sector SPDR ETF (XLE), which target an upcoming 28%-30% rise in these assets amid what appears to be an emerging, corroborating advance in positively-correlated crude oil prices.

Chart 7 plots XOI alongside the S&P 500 since 2000, and points out that these two series have maintained and stable and significant positive correlation to one another for the past 20 years.  Per the correlation, upcoming intermediate to long term strength by XOI suggests a similar upcoming advance by the US broad market.

Economically, this implies an upcoming increase in economic demand which would indirectly support our overall positive bias for the US stock market in 2013.

A Strengthening Energy Sector Is Positive For US Stocks
Asbury Research Commentary, January 25th 2013
(access requires subscription)

 

During the same 17 month period the Energy Sector SPDR ETF (XLE) has risen by 20.11 points or 26% to meet our 97.00 upside target on June 9th, while the positively correlated S&P 500 has coincidentally risen by 457 points or 30%, both as forecast in our January 2013 report.