A client writes, “It’s interesting that you mention that the energy sector is starting to heat up. I remember from my economic vs. market cycle readings that oil is the last sector to move in the market as the economy is peaking. An example is the oil price peaking in July, 2008 after the economy had already peaked and we went into recession. Is the fourth quarter GDP a sign of a peaking economy?”
Regardless of whether the economy is peaking or not, there’s no denying the exceptional strength in the oil/gas sector. As I highlighted in the Momentum Strategies Report last month, the longer-term internal momentum for the oil stocks (OILMO) has been accelerating in recent weeks and went vertical in late January. Not surprising, the equities of oil companies fed off this internal strength with many actively traded oil stocks making new highs. Where internal momentum leads, stock prices always follow.
Along these lines, I came across the following chart which shows the historically bullish seasonal tendency of the oil/energy sector, courtesy of Seasonalcharts.com.