By Mike Paulenoff, www.MPTrader.com
The S&P Select Energy ETF (AMEX: XLE) is at a crossroads right here. On one hand, I can make the case that all of the action since the 9/21 high at 76.30 represents a high-level congestion area between 76 and 73.50, which when complete (in a matter of hours) should resolve itself in one more thrust to new highs that projects to 78-79 prior to the end of the entire upleg from 8/16 (62.73). However, if the XLE breaks and sustains beneath 73.50/20, then the "contained" pullback pattern begins to morph into a much deeper correction that likely presses towards 70.00 thereafter. Right now, although the bullish scenario is my primary view, I am also aware that after the next new high, I am expecting a very significant corrective period to emerge. In other words, anyone long the XLE had better be very nimble above 77.00 ahead of a nasty downside reversal. I will remain a spectator for a while longer, looking for an opportunity to sell short the XLE -- with any luck, into strength.