— Matthew Timpane, CMT (@mtimpane) January 13, 2022
Today’s Chart of the Day was shared by Matthew Timpane (@mtimpane). It’s a ratio chart of the Energy Sector vs. the S&P 500 over the past six years ($XLE/$SPY). Energy has been the worst-performing sector over the past 3, 5, and 10 years. However, the long-term trend of underperformance has been in the process of reversing over the past year or so. It was the best performing sector in 2021, gaining more than 50%, and it has continued to outperform by a wide margin in the new year. It’s already up more than 13% in the first two weeks of 2022, while the S&P is down about 2%. Matthew points out that this ratio is currently testing an important resistance level after forming a bottoming pattern known as an inverse head & shoulders. If it does break out here, it would be further confirmation that a long-term trade change is truly underway.