The Energy Select Sector SPDR ETF (NYSEArca: XLE) surged nearly 11%, good for one of the best performances among the nine sector SPDR exchange traded funds.

XLE’s October resurgence came as investors digested what was a batch of predictably dire earnings reports from the energy sector. Heading into the start of third-quarter earnings season, some market observers predicted energy sector earnings would contract as much as 60%, the worst contraction of any S&P 500 sector.

XLE is still the worst performer among the nine sector SPDR exchange traded funds this year and traders’ pessimism toward the energy sector is reflected in elevated short interest in some of XLE’s big-name holdings.

Ongoing struggles for XLE and rival energy ETFs are prompting some market observers to wave the white flag when it comes to forecasting what’s next in the energy patch.

Some institutional investors are steering clear of energy stocks, but at least one exchange traded funds strategist is embracing beaten-up energy sector ETFs. However, that could portend opportunity with XLE.

Profit expectations have fallen dramatically which in turn has pushed the sector’s P/E ratio much higher even as stock prices have declined, though P/Es have come off their highs and estimates appear to have stabilized,” according to AltaVista. [Oil ETF Dividends Appear Safe…Sort Of]

Now, energy majors, such as those found in XLE and rival energy ETFs, are resorting to cutting costs to appease investors. However, most oil giants are protecting if not raising dividends.

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