Market Overview

An Eventful Energy Week Looms For These ETFs

An Eventful Energy Week Looms For These ETFs

Although the market is nearing the point where the number of earnings announcements will begin to draw down, this week represents something like the final surge. Nearly 26% of the S&P 500 is set to report quarterly results this week, some sectors will see a higher concentration of company reports than even that.

What Happened

The Energy Select Sector Index (IXETR), which resides more than 20% below its 52-week, meaning that it is in a bear market, sees just over 72% of its components report second-quarter results during the week starting July 29.

That batch of reports could present nimble traders with just the short-term catalysts they need to deploy the Direxion Daily Energy Bull 3X Shares (NYSE: ERX) or the Direxion Daily Energy Bear 3X Shares (NYSE: ERY). The bullish ERX looks to deliver triple the daily returns of the Energy Select Sector Index while the bearish ERY tries to mirror triple the daily inverse returns of that benchmark.

Why It's Important

With just over 72% of the Energy Select Sector Index report earnings this week, that means Dow components Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), the two largest domestic oil companies, are slated to step into the earnings confessional. Those stocks combine for nearly 43% of the Energy Select Sector Index.

Analysts expect Exxon to post a quarterly profit of 69 cents a share, down from 92 cents a year earlier. Chevron is expected to report second-quarter earnings of $1.78 a share, in line with the 2018 second-quarter results. Both reports will be delivered Friday, August 2.

“Exxon and Chevron usually keep earnings news releases and calls with analysts strictly about their quarterly numbers, but investors might be able to gauge their mood toward mergers and acquisitions when talk turns to expanding in the U.S. or their inventories,” according to MarketWatch.

What Happened

As we draw closer to Friday, August 2, it would be reasonable to expect increased activity in ERX and ERY. Direxion data indicate that last week, the bullish ERX and bearish ERY were mostly docile in terms of flows, though there was some slightly elevated activity in some of the issuer's other leveraged energy ETFs. ERX fell about 2% last week with the bulk of those declines coming last Friday.

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Posted-In: Earnings Long Ideas News Sector ETFs Short Ideas Commodities Trading Ideas ETFs