ETF Chart of the Day: Energy Sector Sell-Off
May 10th 2012 at 12:38pm by Paul Weisbruch, Street One Financial
In the past several sessions, investors have begun to vacate a number of energy related equity ETFs amid both selling pressure in the equity markets as well as a steep decline in Crude Oil.
PowerShares DB Oil (NYSEArca: DBO) for example has staggered nearly 10% just in the past 5 trading sessions and is now trading below its 50 day moving average for the first time since mid-December of last year.
Trading volumes in DBO and related Crude Oil ETFs such as U.S. Oil Fund (NYSEArca: USO) have been off the charts recently as well. Energy related equities including Oil and Gas Explorers and Services companies have not been spared in this downdraft, and we have seen more than $800 million in recent sessions collectively leave SPDR Energy Select (NYSEArca: XLE), SPDR Oil & Gas Exploration and Production (NYSEArca: XOP), and Market Vectors Oil Services (NYSEArca: OIH) via redemption activity.
All three ETFs have sold off sharply in the past week on heavy trading volume, and are currently trading at multi-month lows. On average, these ETFs are down about 7% in the past 6 trading sessions. [Gasoline ETF Plunges]
Top holdings in XLE currently are XOM (18.85%), CVX (14.77%) and SLB (7.08%) while XOP tilts more towards mid and smaller cap energy related names that are not necessarily the giant integrated oil plays. Specifically, XOP’s top holdings currently are SUN (1.85%), CRK (1.74%), and GEOI (1.68%).
OIH has some overlap with XLE and a heavy weighting torwards SLB (19.21% and the top holding). Rounding out the top three weightings are NOV and HAL at 9.80% and 9.23% respectively.
We have pointed towards heightened options activity for at least a week and a half in our daily notes to trading clients in XOP, specifically consisting of downside put buying, and this activity has proven directionally correct, and in short order.
What remains to be seen is that if Crude Oil the commodity levels off, and perhaps begins to rally, will the Oil related equities also follow suit as they did when Oil sold off sharply over the past few weeks.
SPDR Energy Select