Editor's Note: Below is an excerpt from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more about the Early Look.

CHART OF THE DAY | Energy: The Dark Horse In A Bullish Trend - z en

After rolling over from late JAN to early APR, the most important move in macro last week was a re-acceleration in both inflation expectations and the market signals that perpetuate them: 

  1. US DOLLAR – down -0.3% on the week was enough to drive that inverse correlation that matters most to commodity reflation
  2. OIL – up a big +8.6% on the week to +11.8% YTD and fresh 2018 highs (that really matters as monthly inflation comparison’s ease)

If you dive into the Sector Styles of the SP500, our re-acceleration in inflation call for Q2 (i.e. Quad 2) was poignant: 

  1. Energy Stocks (XLE) led the charge +6.0% on the week moving back to Bullish TREND @Hedgeye (from Bearish)

Since getting long either Energy or REITS are contrarian pivots I’ve been considering post Reflation’s Rollover playing out (and it’s really an either/or decision as I don’t think one can really work alongside the other), for now I’ll take Energy (XLE) on pullbacks. 

CHART OF THE DAY | Energy: The Dark Horse In A Bullish Trend - 04.16.18 EL Chart