XLE

The above is a weekly chart of the XLE (energy spdr). Energy companies form some of the largest components in the SPX; XOM (Exxon) itself accounts for close to 5%. These stocks fell off a cliff and had a steeper fall than many others in a short period of time (July  - Oct). Since then, as has been in our stance in our previous post, a time correction is going on. Accordingly, the XLE (and the XLU - utilities spdr not shown here) have been in a sideways triangle pattern. 

So the bad news - Triangles are continuation patterns, meaning another downleg is very likely.

The good news - Triangles are almost always occur  just prior to the "last" move in the direction of the trend.

So, when the triangle breaks down(our guess within the next month) and there is a downward thrust from the triangle, we should see a large recovery rally. Usually these recovery rallies tend to retrace the whole "last" leg and then some more.

We will be watching very keenly for the breakdown and signs of downward exhaustion, since there is money to be made both ways. The triangle is invalidated if XLE rises above 53 or so.