Amidst the tumult in the pre-market session Monday, oil behemoths Chevron Corp (CVX) and Exxon Mobil Corp (XOM) tentatively clawed back from their recent travails. Last week’s torrid sell-off punished both titans, especially Chevron, as economic doubts loomed large.
Market anxiety only heightened following the tepid unveiling of the August jobs report. Although payrolls slightly expanded by 142,000, up from July’s 89,000, the figure fell short of analysts’ 161,000 projection. Simultaneously, the jobless rate hit 4.2%, in line with forecasts. Nonetheless, the ‘real’ unemployment rate, encompassing discouraged and part-time workers, surged to an unsettling 7.9%.
The looming specter of a decelerating economy cast a pall over oil prices, with West Texas Intermediate and Brent Crude indices taking a noticeable hit. Muted consumer confidence indicators from China reverberated across Western conglomerates, triggering concerns about diminished global hydrocarbon demands.
Beyond economic woes, geopolitical tremors, notably echoing from the Middle East, threatened to disrupt energy markets unpredictably. Historically, OPEC+ nations have curbed production to shore up slipping prices.
Yet, amid the gloom, a glimmer of hope emerges. Recent Ukrainian drone assaults on Russian oil facilities have brutally battered the aggressor’s downstream infrastructure. Persistent disruptions might paradoxically elevate oil prices, borne from this synthetic supply constriction.
Looking further ahead, the International Energy Agency forecasts that by 2030, India could blossom into the primary engine driving global oil demand. This shift might help counterbalance any downtrend stemming from the Chinese market.
Surveying the ETF Landscape
Within this complex interplay, investors eyeing both sides of the oil domain could explore Direxion’s expansive collection of leveraged exchange-traded funds. Bulls may gravitate towards the Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH), delivering 200% exposure to the underlying S&P Oil & Gas Exploration & Production Select Industry Index.
On the flip side, for those bearish on hydrocarbons, the Direxion Daily S&P Oil & Gas Exploration & Production Bear 2X Shares (DRIP) strive to mimic 200% of the inverse performance of the same index. Regardless of the chosen fund, investors must tread cautiously, as both GUSH and DRIP are designed for daily holds to avert adverse compounding effects on performance.
The Performance of GUSH ETF
Although GUSH commenced the year strongly before a minor hiccup early in January, the ETF has yielded over 18% in losses year-to-date.
- Recent sessions battered the oil energy market, with GUSH notably below its 50-day moving average of $32.84 and the 200 DMA, pegged at $34.47.
- Nonetheless, the $27 support range beckons as a beacon of hope. Should GUSH stand firm, a potential recovery could emerge, fueled partly by positive fundamental catalysts.
The Trajectory of DRIP ETF
On the contrarian path, DRIP faced a tumultuous start in 2024. Subsequent fading oil prices since April, however, brought solace to the pessimists.
- In stark contrast to the 2X bull fund, DRIP basked in a robust performance last week, surging over 15% in market value.
- Whether the bear fund sustains its upward stride remains uncertain. Notably, DRIP encounters a resistance zone spanning from $12 to $13, imposing potential challenges.
Featured photo by Pete Linforth on Pixabay.
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