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XOP: Oil & Gas Fund Clings to Support

AMEX:XOP   SPDR SERIES TRUST
The stock market's been undeniably strong, but energy has been the weakest link. Of the 11 major sectors, energy remains at or near the bottom of the rankings. (It's also the only one under its 200-day SMA )


The S&P Oil & Gas Exploration ETF is a heavily traded name within the broader energy space. It averages almost 2x more options on a daily basis than the better known XLE: 122,000 contracts in the last month vs 76,000 for XLE , according to TradeStation data.

XOP's MACD has been declining since early in the year and it's now trying to hold the $23 level where it peaked in early November. This sets up the potential for a break to the downside and a retest of the December lows around $20.

The energy market has struggled with a supply glut. Just this week both the EIA and the IEA had bearish news. The EIA , part of the U.S. government, said domestic oil production passed 13 million barrels for the first time ever. Weekly data also showed big inventories of unused refined products. The IEA, a global organization, separately predicted non-OPEC supply will keep swelling.

Throw in a potential of calmer tensions in the Middle East, and the risk/reward may favor weakness in this corner of the market.

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