XLE vs SPY next-10-session performance after a lagged +2% Brent spike on an XLE down day
A crude spike that energy stocks refuse to follow looks like a classic washout signal. If Brent jumps more than 2% and XLE still closes lower, the theory goes, the cross-asset volatility is flushing out weak hands — and once it clears, energy should reprice the higher crude and lead the broad market.
We tested that over roughly three years of daily data, measuring XLE against SPY over the next 10 sessions after 55 such signals. XLE did lean ahead, averaging about half a point of excess return and beating SPY 60% of the time. But the scatter is wide enough that the result is statistically indistinguishable from noise, and both ETFs rose on average — most of the move was broad market bounce, not energy leadership.
The full breakdown, including the baseline comparison and the outliers dragging the mean, is below.
Over the past ~3 years, when Brent crude's one-day return is above +2% but XLE closes lower, does XLE outperform SPY over the next 10 trading sessions? I expect a supply-driven crude spike that energy equities cannot hold to mark a broad macro risk flush, and once the cross-asset volatility clears XLE reprices the higher crude level and leads the broad market.
How this was measured
Daily XLE and SPY closes were built from minute bars. The Brent trigger uses brent_daily_df values converted to one-day returns. Because the Brent daily series is T+1, the prior official Brent return is lagged one session and forward-filled onto the US equity trading calendar, so the signal is observable at the XLE close. A signal day requires that lagged Brent return to be above +2% and XLE's same-day close-to-close return to be negative. For each signal day, forward 10-session returns for XLE, SPY, and their difference are measured from close t to close t+10. The analysis compares signal-day excess to zero and to non-signal days.
The key numbers
Reading the numbers
On the 55 days that fit the setup, XLE beat SPY by about 0.47% on average over the following 10 sessions and did so 60% of the time. But that average is small enough relative to the day-to-day noise that it is statistically indistinguishable from zero (p=0.57), so this sample can't confirm the edge either way.
The charts
This traces the average path of XLE, SPY and their gap over the 10 sessions after each signal, starting at zero. Both lines grind higher rather than jumping — XLE finishes up about 1.62% and SPY about 1.15%, leaving the excess at roughly +0.47%. The detail worth noting is the excess line: it dips marginally negative early (about -0.1%) before building to a peak near +0.54%, so the outperformance accrues gradually over the window rather than appearing as an immediate repricing.
This histogram shows how the 55 individual signal outcomes are spread, and the spread is wide — from about -20.3% to +13.6% excess, with an average of +0.47%. The shape matters more than the mean: the median outcome is +1.47%, higher than the average, which tells you a handful of large negative readings are dragging the average down. So the typical signal actually favored XLE more than the headline number suggests, but the losers are big enough to make the result unreliable.
Four bars compare the group averages side by side: XLE +1.62% and SPY +1.15% on signal days, the +0.47% excess, and -0.21% excess on the 687 non-signal days. The signal excess bar is positive while the baseline bar is slightly negative, a gap of roughly 0.7 percentage points in XLE's favor — directionally consistent with the thesis. Two caveats stand out: both XLE and SPY rise on signal days, so these look more like broadly rising markets than macro risk flushes, and the signal-versus-baseline gap is not statistically clear (p=0.42).
Signal-day events (most recent 40)
| signal_date | brent_lag1_ret | brent_same_ret | xle_day_ret | xle_fwd10 | spy_fwd10 | excess_fwd10 |
|---|---|---|---|---|---|---|
| 2024-08-01 | 0.0269 | -0.0002 | -0.0269 | -0.0032 | 0.0231 | -0.0263 |
| 2024-08-13 | 0.0245 | -0.0066 | -0.005 | 0.0129 | 0.0348 | -0.0219 |
| 2024-10-08 | 0.0305 | -0.0434 | -0.0266 | -0.0084 | 0.0181 | -0.0266 |
| 2024-10-23 | 0.0314 | -0.012 | -0.0056 | 0.0408 | 0.0207 | 0.0202 |
| 2024-12-04 | 0.0273 | -0.0016 | -0.023 | -0.0893 | -0.0314 | -0.0579 |
| 2025-04-10 | 0.0376 | -0.0287 | -0.0739 | 0.0703 | 0.0556 | 0.0147 |
| 2025-04-21 | 0.0204 | 0.0205 | -0.0283 | 0.0145 | 0.0906 | -0.0761 |
| 2025-04-23 | 0.0204 | -0.0097 | -0.0136 | -0.0126 | 0.0455 | -0.058 |
| 2025-05-14 | 0.0253 | -0.0152 | -0.013 | -0.0328 | 0.0034 | -0.0361 |
| 2025-05-29 | 0.0218 | -0.017 | -0.0036 | 0.0566 | 0.0205 | 0.0361 |
| 2025-06-18 | 0.0486 | -0.0041 | -0.011 | -0.005 | 0.0501 | -0.0552 |
| 2025-07-14 | 0.0239 | -0.0153 | -0.0144 | 0.001 | 0.0212 | -0.0202 |
| 2025-07-18 | 0.0237 | -0.0036 | -0.0066 | -0.0035 | -0.0106 | 0.0072 |
| 2025-07-30 | 0.033 | 0.0105 | -0.0131 | -0.022 | 0.009 | -0.0311 |
| 2025-08-15 | 0.0282 | -0.012 | -0.0014 | 0.0581 | 0.0025 | 0.0555 |
| 2025-10-24 | 0.0649 | -0.0078 | -0.0094 | 0.0171 | -0.0073 | 0.0244 |
| 2025-11-17 | 0.0211 | -0.0046 | -0.0215 | 0.004 | 0.0257 | -0.0217 |
| 2025-11-19 | 0.0269 | -0.0167 | -0.0165 | 0.0251 | 0.0221 | 0.003 |
| 2025-11-25 | 0.0327 | -0.013 | -0.0017 | 0.0403 | 0.0145 | 0.0258 |
| 2025-12-24 | 0.0238 | 0 | -0.0029 | 0.0536 | 0.0059 | 0.0477 |
| 2025-12-26 | 0.0238 | 0 | -0.0036 | 0.0491 | 0.0057 | 0.0433 |
| 2026-01-09 | 0.037 | 0.0279 | -0.0003 | 0.0539 | -0.0022 | 0.0561 |
| 2026-01-12 | 0.0279 | 0.0045 | -0.0079 | 0.072 | 0.0047 | 0.0673 |
| 2026-01-26 | 0.0412 | -0.0067 | -0.0025 | 0.0901 | 0.0011 | 0.0891 |
| 2026-03-03 | 0.083 | 0.0782 | -0.0104 | 0.0373 | -0.014 | 0.0513 |
| 2026-03-04 | 0.0782 | -0.0207 | -0.0049 | 0.042 | -0.0379 | 0.0799 |
| 2026-03-09 | 0.0807 | -0.0145 | -0.0168 | 0.0748 | -0.0248 | 0.0996 |
| 2026-03-13 | 0.1253 | 0.0083 | -0.0002 | 0.0932 | -0.0427 | 0.1359 |
| 2026-03-18 | 0.0727 | 0.0895 | -0.0004 | 0.0096 | -0.0066 | 0.0162 |
| 2026-03-30 | 0.0713 | 0.0034 | -0.0105 | -0.1013 | 0.1016 | -0.2029 |
| 2026-04-01 | 0.0395 | -0.0563 | -0.035 | -0.0356 | 0.0726 | -0.1082 |
| 2026-04-14 | 0.0354 | -0.0372 | -0.0221 | 0.0357 | 0.0257 | 0.01 |
| 2026-05-13 | 0.0496 | -0.0098 | -0.0005 | -0.0127 | 0.0155 | -0.0282 |
| 2026-06-04 | 0.0325 | -0.0266 | -0.0028 | -0.0832 | -0.0076 | -0.0757 |
| 2026-06-30 | 0.0204 | -0.0158 | -0.0077 | 0.0626 | 0.0112 | 0.0514 |
| 2026-07-09 | 0.0658 | -0.0267 | -0.0158 | 0.0836 | -0.0169 | 0.1005 |
| 2026-07-14 | 0.0979 | 0.0254 | -0.0005 | 0.0225 | -0.0126 | 0.0351 |
| 2026-07-15 | 0.0254 | -0.0073 | -0.0074 | 0.0368 | -0.0295 | 0.0663 |
| 2026-08-03 | 0.0548 | -0.083 | -0.0236 | 0.0662 | 0.0188 | 0.0473 |
| 2026-08-07 | 0.0346 | -0.0226 | -0.012 | 0.1047 | -0.0083 | 0.113 |
Forward 10-session return summary
| series | N | mean | median | std | positive_share |
|---|---|---|---|---|---|
| Signal XLE | 55 | 0.0162 | 0.0171 | 0.0468 | 0.6182 |
| Signal SPY | 55 | 0.0115 | 0.0112 | 0.0299 | 0.6909 |
| Signal XLE-SPY excess | 55 | 0.0047 | 0.0147 | 0.0618 | 0.6 |
| Non-signal XLE-SPY excess | 687 | -0.0021 | -0.0043 | 0.0455 | 0.4731 |
The takeaway
Short answer: the setup doesn't hold up as an edge — XLE does lean toward beating SPY after these signals, but the tilt is small enough that it's indistinguishable from noise. On the 55 qualifying days (lagged Brent up more than 2%, XLE down), XLE averaged +0.47% of excess return over SPY across the following 10 sessions, and it finished ahead 60% of the time, versus a non-signal baseline of -0.21%. That looks encouraging until you price in the scatter: the median excess was +1.47% — bigger than the average, meaning a handful of bad signals are dragging the mean down — and the spread of outcomes was wide, with one August 2024 event showing XLE trailing SPY by 5.8%. Statistically it's a coin flip: the chance of seeing a +0.47% average excess this large purely by luck is about 57 in 100 (p = 0.57), and comparing signal days against ordinary days gives almost the same verdict (p = 0.42). Note too that both ETFs rose on average after these signals (+1.6% XLE, +1.1% SPY), so most of what you're capturing is broad market bounce, not energy-specific leadership. Practical takeaway: the story is plausible but this sample can't confirm it — treat the signal as a hypothesis that needs more events or a cleaner filter (e.g., excluding cases where the crude spike was already reversing), not as a tradeable rule.
The fine print
- Only 55 signal days in three years, and crude spikes cluster — the overlapping 10-day windows mean the true independent sample is smaller than 55.
- The Brent series is T+1, so the +2% condition uses the prior official session's return; a same-day-aligned test would silently use future information.
- The +2% threshold and 10-session horizon are arbitrary choices — nudging either materially changes the result.
- Close-to-close prices exclude dividends and trading costs; XLE and SPY yield differently, and no macro/OPEC/earnings controls are applied.