These ETFs Say The Energy Rally Has Doubters

Once downtrodden, energy equities and the corresponding exchange traded funds have recently been showing signs of promise. Although the sector is still the worst-performing group in the S&P 500 this year, the largest equity-based energy ETF is higher by nearly 7 percent over the past month.

Still, oil prices fell for a third consecutive session on Wednesday despite a significant drawdown in U.S. inventories. That took crude below $50 per barrel, well off the $60 level some oil market observers believe is necessary to generate confidence in a legitimate energy sector rally. Plus there was the news that Libya is about to restart production at its largest oilfield. 

In other words, it will take some convincing for more investors to buy into this energy rally. Moreover, there are some data points pertaining to some inverse energy ETFs indicating that some traders outright doubtful about more near-term upside for the energy sector.

Survey Says...

If certain inverse leveraged energy ETFs are an accurate representation, there are plenty of traders that are overtly bearish on the energy sector. Take the case of the Direxion Daily Energy Bear 3X Shares ERY, which is designed to deliver triple the daily inverse returns of the Energy Select Sector Index.

Over the past month, ERY is averaging daily inflows of nearly $850,000, according to Direxion data. What that says is that some traders are bearish on or hedging Exxon Mobil Corp. XOM and Chevron Corp. CVX, which account for about 40 percent of the index ERY tracks.

ERY is not the only ETF attracting the doubting Thomases of the energy trade. The Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares DRIP has been a favorite of traders as well. Over the past month, DRIP is averaging daily inflows of more than $1.1 million, according to Direxion data. 

DRIP seeks to deliver triple the daily returns of the S&P Oil & Gas Exploration & Production Select Industry Index.

Running On Fumes

The ISE-Revere Natural Gas Index is higher by almost 11 percent over the past month, trimming its year-to-date loss to about 17 percent, but natural gas equities have doubters as well.

The Direxion Daily Natural Gas Related Bear 3X Shares GASX, which is designed to deliver triple the daily inverse returns of the ISE-Revere Natural Gas Index has been increasingly popular with traders in recent weeks.

GASX is averaging daily inflows of $157,200 over the past month, according to issuer data. 

Related Links:

Getting Bearish On Nat Gas.

Be Cautious With Energy ETFs.