🚨 Profit Panel is live at 9:30 a.m. ET🚨
With gas creeping back up toward $4 a gallon heading into the heat of summer, oil is strangely lagging the move. I’m diving into what this divergence means for energy traders and how to play it ahead of major after-hours earnings from TSLA, GOOG, and IBM [tap to join us for Profit Panel]
I spent most of Tuesday morning looking at something I don’t see very often.
Gold was up $40, silver was up more than $2, copper had gained $16, the S&P 500 (SPY) was climbing and crude oil was higher by more than $2.35.
All at the same time.
That’s not how markets usually behave.
Normally, when crude oil pushes sharply higher, it creates headwinds for much of the broader market. But this time the usual relationships aren’t holding.
It’s a spaghetti kind of market, where the correlations that normally keep everything in balance have started to unravel.
With tensions still centered around the Strait of Hormuz and uncertainty surrounding Iran continuing, it’s not surprising to see crude moving higher.
What’s unusual is seeing so many other assets rising alongside it.
Not Every Energy Stock Is Reading the Same Script
Whenever crude starts making a move like this, I immediately look across the energy sector.
HF Sinclair (DINO) has been climbing relentlessly, printing one strong session after another. Peabody Energy (BTU) has also been pushing higher, and Valero Energy (VLO) continues to perform well, which is encouraging because we’re long that position.
But not every energy stock is participating.
Oil service companies like Halliburton (HAL) haven’t kept pace with the move in crude, reminding us that even within the same sector, leadership can be very selective.
Those divergences often tell you more than the index itself.
The Bigger Picture Behind Oil’s Strength
A significant portion of the world’s oil still moves through the Strait of Hormuz, making geopolitical tensions impossible for energy traders to ignore.
At the same time, the global demand picture has become more complicated.
China has reduced its crude oil purchases while increasing imports of liquefied natural gas. That shift may be helping keep oil prices from accelerating even faster. Without it, crude could already be testing much higher levels.
Meanwhile, India continues buying large volumes of Russian oil, reshaping parts of the global energy trade while geopolitical uncertainty remains elevated.
As long as those tensions persist, I think crude oil has room to continue moving higher.
The bigger question is whether the broader market can continue rising alongside it or whether these unusual correlations eventually return to normal.
Until then, I’m staying focused on relative strength, respecting the divergences and keeping position sizes under control.
When the market stops following its usual rules, it’s usually a good idea to stop assuming yesterday’s playbook still applies.
Geof Smith
Geof Smith Trading
Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
- Telegram: https://t.me/+lm8_Nq3Su104NmFh
- YouTube: https://www.youtube.com/@FinancialWars
Important Note: No one from the ProsperityPub team or Geof Smith Trading will ever contact you directly on Telegram.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Institutional Money Is Moving Fast — Next Trade Inside
As institutional money moves fast, this massive asset is heating up for a historic run-up — and we are setting up our next weekly trade this week.
Last year, we bypassed the stock market completely and went a perfect 52-for-52.
Access the private inner-circle briefing here before the next trade drops.
Claim Your Exclusive Spot Here
Disclaimer: Since 12/05/2024, the trading approach discussed today has published 66 trade alerts. 65 of 68 have returned as winning trades, for a 95.6% win rate. The average return per trade, winners and losers combined, has been 12.84% on an average holding period of 10 days. With a $5,000 starting stake, every trade targets about $841 in returns, and every trade you see today will be based on that $5,000 starting stake unless otherwise stated.
