Tuesday, September 21, 2010

The Oil Angle

After spotlighting the relationship between precious metals in yesterday's The SLV Lining post, today marks yet another foray into the commodity space in an attempt to draw some meaningful conclusions. Whether it is due to my recent fixation on relative comparison charts or my monthly option plays on the United States Oil Fund (USO), I've noticed oil has been riding the pine for much of the recent bull run.  In Monday's Chart of the Week, Bill Luby of VIX and More cited the broad-based support for the market rally as virtually every  market sector was experiencing notable gains.  The same could be said regarding commodities for that matter.  In addition to the aforementioned silver and gold, we've seen a variety of agricultural commodities climb on board the bull boat as well.

So what's the deal with oil?  Not only is it not on board, it's floundering in the water unable to catch a bid.  Consider the following relative comparison chart (click to enlarge).

[Source:  Livevol Pro]

While USO did a commendable job in tracking the performance of both the SPY and GLD through the month of April, from May forward it seems to have lost its mojo.  Despite the apparent weakness in the underlying commodity, it may be important to note that most energy stocks have fared much better over the same time frame.  Both the Energy Select Sector SPDR Fund (XLE) and Oil Services HOLDRS Trust (OIH) have had much better participation in the recent rally in the equities market.

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