By now everyone is aware that commodities and inflation plays are doing well and expected to post gains in ’18.

Tuesday’s action in energy was peculiar.  Lots of eyeballs were on the break of 62 in WTI, but energy stocks largely didn’t care and some reversed lower.

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It’s worth pointing out that the global oil benchmark Brent is testing the long time pivot level of 70.  The last time Brent reached this level in 2015, the price dropped 60%.  That’s not at all suggesting any such decline is in the cards, but it’s representative of the importance of this area.

brent

It’s also worth noting Energy ETF XLE is testing the 2016 high.

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We know investors are bullish, the broad market is overheated and commercial hedgers are heavily short oil.  This all makes for an interesting confluence that gets our attention for a potential reversal lower.

Alternatively, if Brent pops through 70 in short order, energy stocks could grab a gear and head into overdrive.