Remember three months ago? I can’t blame you if you would rather not.

West Texas Intermediate was fetching $106 a barrel and energy stocks were the cinderellas of a bullish ball.

Our portfolios were way ahead of the pack, and we were raising buy limits on many of our favorite names even as we acknowledged the likelihood of a correction.

This pullback materialized soon thereafter, but it was a half-hearted, low-volume affair.  As recently as late August, I called it ” a test … energy stocks passed with flying colors.”

That marked, to the day, the top of the month-long bounce. Then came September, when Cinderella lost not one but both of her shoes and tumbled down the stairs straight into the gutter.

I’m taking a bit of a dramatic license here, but only a bit. The Energy Select Sector SPDR ETF (NYSE: XLE) is down 8% since Labor Day, vs. a drop of a little more than 2% for the S&P 500.

The SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP), made up of smaller and more volatile names, is down 12% this month. The orderly retreat begun this summer has started to look more and more like a rout.

The S&P 500, which closed at a record just a week ago, is still hanging around its 50-day moving average. It hasn’t so much as grazed its upwardly sloping 200-day since late 2012. Its heavyweights — notably Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Johnson & Johnson (NYSE: JNJ) and Berkshire Hathaway (NYSE: BRK.B) — are up way more than the broader market this year.

The XLE hasn’t gotten any lift from ExxonMobil (NYSE: XOM) or Chevron (NYSE: CVX), which is why it’s lucky to still be up 2.6% year-to-date and to have only slipped below its 200-day trend during Thursday’s plastering.

But the XOP has now dropped is now more than 5% below its 200-day. It hasn’t looked this sickly for almost two years, and with the broader market losing altitude and breadth, the near-term omens are frankly pretty discouraging.

     LAUNCH ABORTED

The energy industry is being victimized by its own success. Shale drilling using constantly  improving techniques has brought forth enough North American crude to offset the diminished exports from Iran, Libya and Venezuela, and to ward off doubts about Iraq and Russia. This, combined with fears of a China-led slowdown in the emerging markets driving the recent growth in energy demand, has quickly pushed crude prices into the low to mid-90s.

Memories of the 2009 collapse are still fresh. An oil analyst actually claimed yesterday that the new era of abundance will eventually bring crude back to $30 a barrel. This is a cry for attention rather than a serious forecast, but it does illustrate how much sentiment has shifted in recent weeks.

Gas drillers have been busy too, and their reward in the Marcellus — the most prolific and fastest growing gas shale play — have been steep regional discounts on gas that still can’t be economically transported to the more lucrative trading hubs outside the region.

Given all this, why aren’t we advising you to cut and run? First, because the selling of energy equities looks overdone. It’s based on fears of further energy price drops that, barring a global economic collapse, seem unlikely. The US economy, and notably its energy-intensive manufacturing and transport sectors, are displaying more momentum than they have in years. The cheapest gasoline in three years isn’t going to deter Americans from buying SUVs. And while China is indeed slowing down, Southeast Asia, the Middle East and Africa are not, and these regions have become increasingly important drivers of global demand.

Five years ago, the developed world was still guzzling fuel it has since learned to sip, Iran and Venezuela were key exporters and much of the Mideast and North Africa was not embroiled in cross-border wars along religious and ethnic fissures. The $40 oil briefly seen in the aftermath of the financial crisis seems a pipe dream now.

Unlike conventional vertical oil wells, which once drilled can keep producing at a relatively low decline rate, horizontal ones used to access shale deposits tail off much quicker, and must be constantly supplemented with new ones to stave off production declines. And given the additional expense of the new hydraulic fracturing techniques much of the shale bounty becomes uneconomical with crude at $75, never mind $40. There’s still a lag between a price decline and a supply response, of course, but it’s a much shorter lag than used to be the case when conventional oilfields could be developed for $20 a barrel and then kept in production at minimal additional cost.

Saudi Arabia targets crude at $100 a barrel, and right now there is no foreign supplier with the spare capacity to offset the production cuts the Saudis have already begun to make. As for that cheap Marcellus gas, demand from liquefied natural gas (LNG) exports is coming, just as it is from Mexico and a petrochemical industry still in the early innings of its US expansion plans.

Yet neither crude nor gas prices need to head higher to provide excellent returns for the producers in the sweet spots of the most productive shale plays. As these commodity prices stabilize, expect the shares of drillers to bounce back.

That may not happen next week or even next month, but time and the economics of energy extraction remain on the side of the patient investor. Despite the current downdraft, our optimism over the last 20 months remains richly rewarded. And the fundamentals underpinning it remain in place, no matter how scary things look right now.

Even if you understandably wish to lighten up, wait for the near-term bounce. It’s coming.