Market Overview

Bearish Energy ETF Could Growl This Month

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Bearish Energy ETF Could Growl This Month

It's often risky betting against momentum and, for once, the energy sector appears to have some. Just look at the Energy Select Sector SPDR (NYSEARCA: XLE). The largest energy exchange traded fund is higher by 18.46% over the past month.

What Happened

Still, energy is the worst-performing sector in the S&P 500 this year and on Tuesday, the American Petroleum Institute (API) said domestic oil inventories rose by 4.2 million barrels. So there's still a case for the volatile Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (NYSE: DRIP).

DRIP attempts to deliver double the daily inverse returns of the S&P Oil & Gas Exploration & Production Select Industry Index, a basket of some of this year's most battered energy equities.

Why It's Important

Embracing GUSH under any circumstances is risky and that's even more the case when energy stocks are showing signs of life. However, there are some reasons for aggressive, short-term traders to consider the bearish energy ETF.

For starters, next week is Thanksgiving Week. While the arrival of Turkey Day week is historically good for the broader market, it's bad for the energy sector. On a historical basis, the two worst-performing industry groups during Thanksgiving Week are oil and gas producers and oil services providers. Both generate negative returns during the penultimate week of November, according to Schaeffer's Investment Research.

Historical trends don't always repeat, but it's also hard to ignore the fact that the bearish GUSH is up 12.25% over the past week and nearly 33% over the past month.

What's Next

Adding to the Thanksgiving Week case for GUSH, remembering that the week is confined to three and a half trading days, is the following nugget.

Of the 25 worst-performing S&P 500 members during the week, historically speaking, nine are either oil and gas exploration and production names or oil services providers. Of that group, seven average Thanksgiving Week declines of more than 1%.

Perhaps this Thanksgiving, it's time to gobble for GUSH.

 

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