$XLE & PCE Deep Dive

Today I'll focus on PCE for the most part and later on I'll briefly touch on XLE's performance today.

Personal Consumption Expenditure (PCE) refers to the measurement of price changes of goods and purchases by U.S households. This gets reported on a monthly basis with quarterly and annual updates. PCE works as a primary inflation gauge for the Federal Reserve. source:https://www.bea.gov/

It is my understanding that PCE is a more accurate indicator to measure inflation as it tracks the changes in consumer behavior, such as switching to more affordable alternatives when prices rise. It's important to be aware of PCE as it can affect investments and the overall sentiment of the market.

How is PCE measured?

It is measured through consumer goods and services. Three components are considered in PCE:

• Durable goods: vehicle parts, vehicles, furniture, etc
• Non-Durable goods: clothing, energy goods, and gasoline (this is relevant for XLE)
• Services: housing, utilities, healthcare, etc.

There is a long term inflation target of 2% . The federal reserved intends to keep this target for stability and economic growth. This means that is PCE is higher than the target, it means that the Federal Reserve needs to step on and increase interest rates. Because the PCE reported today surpassed the target, it signaled that the Federal Reserve may need to keep the 'brakes' on the economy. This created a headwind for XLE. Since the 'Big Three' (XOM, CVX, COP) are energy-based, they are sensitive to these inflation reports. When the market expects higher rates for longer, it often cools the demand for the very products these companies sell.

So, now that we know the above, we can understand how today's PCE affected $XLE, given that it is composed of different stocks, but the big three (XOM, CVX, and COP) are oil companies. Because the PCE reported today – February 20, 2026 – surpassed the target, it means that there needs to be a bit of cooling that on the three main components of PCE. Let's move to today's analysis:

As shown above, after yesterday's high, we did observed a retreat today and the new resistance was tested throughout the day. This retreat could have been heavily influenced by PCE early news, where many investors observed that PCE was higher than anticipated. Again, XLE was specifically affected as the big three (XOM,CVX, COP) fall under non-durable goods.

I want to point out that the RSI is in healthy conditions in my opinion, mid 50s just as XLE tried to break the resistance again at the end of the day. Looking at this chart today, it definitely reminded me of my previous wins analysis, specifically Delta. In the past I observed something similar where the resistance was re-tested with a steady RSI, and I believe this is what we will see next week, a rise in XLE current price.

Now, yesterday I mentioned that if $XLE went down, I was going to be taking some profits by selling half of my contracts. I did this as I noticed a push-pull dynamic around 11 am, this made me feel like I was gambling so I decided to recover my initial investment and watch the remainder of the contract play its part. Updating the stop loss as the price of an asset decreases has definitely minimized my loses, it makes me feel prepared.

Final thoughts

It's the weekend again, which means I have a mini tantrum because I want the market open. Overall, I am happy that I took half of my contracts, but I know that part of me will wish I didn't make this move if XLE increases early next week. However, staying grounded and moving stop loses as the price of XLE increases gives me peace of mind.

I'm slowly learning way beyond the stock market. Learning about various financial terms and reports will allow me to make decisions on future investments. We'll see what next week has in store of XLE.