Oil is trading near 52 week highs. Just a couple days ago, it grazed $60/bbl, the highest level in well over a year. So why am I so bearish on the commodity and oil stocks? The simple answer comes from looking at the performance of oil stocks. Individually, you can look at Halliburton Company (NYSE:HAL) or the ETF that tracks oil stocks, the $XLE. You would expect these stocks to be at or at least near 52 week highs with the bullish market action and oil near multi-year highs. However, that is not the case. In fact, the Energy Select Sector SPDR (NYSE:XLE) has a very bearish chart and looks ready to break lower. In addition, Saudi Arabia is likely keeping oil up only until the Saudi Aramco IPO debuts early next year. The US is producing massive amounts of oil/natural gas as well. Even for an economy that is growing, there is too much net oil. The charts signal a bearish drop coming in oil and oil stocks. Watch for the XLE (NYSE:XLE) to break the below trend line for a move as low as $62.00.
