Andrew Gordon at Investor’s Daily Edge says the energy markets are showing renewed sings of life. Geopolitical risk in the Caucasus and a short-lived spike in crude oil prices back over $120 a barrel have sent benchmark energy ETF Energy Select Sector SPDR (AMEX:XLE) up sharply. And the return of Chinese cars and industry following the Olympics should provide a major boost for global energy demand.

The XLE ETF - which follows oil and gas companies, energy equipment makers and energy services companies - had a pretty good week. It was up over 5%. It passed several tests last week.

• It bounced off its previous low and surged higher.
• It touched below its 100-week moving average before moving back up with conviction and on high volume.
• It moved back into its long-term upward trending channel.

On the other hand, it failed to break through its 50-week moving average which is acting as resistance on a further price rise right now. Breaking that resistance level will establish the ETF’s move up.

The XLE moved up as the war in Georgia showed troubling signs of continuing. Plus the price of oil last week moved above $120 before falling back again. Oil service companies moved up higher than oil producers last week, and that should continue to be the case if the price of oil decides to flirt more with $120 than $110.

As the Olympics end, all eyes will be on China. Will energy demand pick up or stay somewhat depressed. My bet is when China puts those million cars back on the road and reopens those hundreds of factories, energy demand (and imports) will pick right back up.

Source: Energy Sector Shows Renewed Life (Without the Help of China!)