The energy sector has enjoyed significant time in the limelight this year, spending a significant portion of 2014 as the top-performing sector in the S&P 500.
That was enough to lift the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund by assets, to the top spot among the nine sector SPDR ETFs. With a pullback of about 2.8% over the past month, XLE has dipped to the third spot among the nine SPDRs and with the recent momentum in the Materials Select Sector SPDR (NYSEArca: XLB), XLE is in danger of ceding that spot as well. [New Highs for Materials ETFs]
Tumbling crude oil futures have been a culprit weighing on XLE and competing ETFs, but that does not mean investors such cash in their energy ETF chips just yet.
“Crude oil rolled over and has been falling and the ETF has been hand off. But it is now time to buy some energy. The daily chart below shows the run up and dip. But most interesting is the interplay with the 3 Simple Moving Averages (SMA) shown, the 20 day, 50 day and 100 day. Notice that the 20 day SMA (red) had acted as support and when that failed in July the price moved lower,” notes Greg Harmon of Dragonfly Capital.
The recent weakness in the energy sector has encouraged investors to pull cash from the relevant ETFs with XLE losing $871.2 million since the start of the third quarter. However, the ETF remains the top asset gatherer among sector ETFs this year with 2014 inflows of $2.46 billion. [Energy ETFs Bringing in the Cash]
Harmon notes traders with longer term time horizons can be heartened by the fact that XLE appears to be finding support at its 100-day simple moving average. That could be a sign that sellers have not been able to affect energy stocks and ETFs to the degree they had previously hoped for.