The energy sector and the corresponding exchange traded funds have had the wind at their backs and it does not look those stocks and ETFs will lose that momentum anytime soon.
On Thursday, another glum day for U.S. stocks, 46 ETFs hit 52-week highs. About half those were energy funds, either of the equity-based or futures variety. That is just one anecdote, but it cements the energy sector’s status as far away the top-performing sector in the second quarter.
Since the start of the second quarter, the Energy Select Sector SPDR (NYSEArca: XLE) is up 5.7%, a performance that is nearly six times better than this quarter second-best sector SPDR, the Consumer Staples Select Sector SPDR (NYSEArca: XLP). [An Energy ETF With Momentum]
XLE has pulled in more new assets at over $3 billion than any other sector ETF this year. Inflows north of $3 billion put XLE ahead of such famous ETFs as the Vanguard Total Stock Market ETF (NYSEArca: VTI) and the iShares Core Total U.S. Aggregate Bond ETF (NYSEArca: AGG). [Strong Economy Aids ETF Inflows]
Higher oil prices driven by geopolitical news, renewed mergers and acquisitions rumors and the sector’s status as a value destination are among the fundamental factors that are driving energy ETFs higher, but with those robust fundamentals come similarly robust technicals. [Old Anadarko Rumor Lifts This ETF]
“The catalyst for this breakout is without a doubt that failed breakdown early in the year. From false moves come really fast ones in the opposite direction. Throughout the second quarter, we’ve started to see that,” notes J.C. Parets of Eagle Bay Capital. “But when a pattern like this is completed, the resolution tends to create a trend that can last longer than most expect. I think there is still 20% upside here and that only gets us to the 2011 highs.”
The 2011 highs being referenced are XLE’s relative strength against the S&P 500. In terms of pure price action, XLE rose to a new all-time Thursday.
“I continue to like the energy space, but particularly on a relative basis. This is one of the more interesting developments we’ve seen throughout the second quarter, but I don’t see it getting many headlines. We like that,” added Parets.
Energy Select Sector SPDR
