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Energy Sector Crushes Conventional Wisdom

By Ronald Delegge Never mind the abysmal results of first-quarter earnings for the depressed energy sector. It doesn’t matter. And never mind the conventional wisdom of group-think and scary analyst warnings like, “Energy stocks are in deep trouble because Q1 losses will mark the first time any sector in the S&P 500 has reported an aggregate loss since Q4 2008.” Again, who cares? Price is what counts – not rigid EPS statistics – and right now energy stocks (NYSEARCA: XLE ) have ripped higher, making them the best performing S&P 500 (NYSEARCA: IVV ) industry sector year to date (YTD). ETFs like the Direxion Daily Energy Bull 3x Shares ETF (NYSEARCA: ERX ) that magnify the performance of energy stocks with triple daily leverage have delivered strong results by gaining almost 30% YTD. In other words, group-think would’ve caused you to miss this trade. And that’s why following conventional wisdom is a time honored recipe for failure. Click to enlarge Contrary to the nearly universal view that energy stocks are untouchable, on March 7 via ETFguide PREMIUM, we saw a great opportunity in oil and gas producers (NYSEARCA: XOP ) and issued the following alert: “XOP is right up our contrarian alley. It’s lost money over the past 1, 3, and 5 years with annualized losses of -9.45%. Who wants to puke? Despite proclamations that everyone will be driving Teslas by 2020, we don’t believe or agree that oil and gas demand will evaporate to zero as certain Kool-Aid drinking clean energy analysts envision. We’re buying XOP at current prices ($29.70).” XOP owns a basket of oil and gas companies like Continental Resources (NYSE: CLR ), Devon Energy (NYSE: DVN ), and WPX Energy (NYSE: WPX ). We added: “Although contrarian trades like XOP usually take longer to develop, they can be far more profitable compared to other types of trades. However, the problem of realizing profits is largely psychological. Why? Because most investors grow impatient and end up selling a great investment before it has time to blossom.” XOP has risen over +19% since our time stamped alert compared to just a +3.39% gain for the S&P 500 (See chart above). Oil and gas producers have also outperformed the broader energy sector. Much of this bounce is attributable to recovering crude oil prices (NYSEARCA: USO ), which now trade in the $45 per barrel range. Nevertheless, buying out-of-favor sectors before they start turning up is a perennial battle for most investors. Too few people do it. Why? Because they’re too scared a bottom hasn’t been reached. Bottom line: Contrarian trades – although often grueling – have a proven track record of success for patient traders and investors. It’s also why I salute all contrarians on this final day of Financial Literacy month! P.S. Contrarian trades are just one of four primary trading strategies we use at ETFguide for non-core investment portfolios. Original Post

Direxion Shares Exchange Traded Fund Trust Up 300% This Year As Gold Soars

The Direxion Daily Gold Miners Index Bull 3x Shares ETF (NYSEARCA: NUGT ) as on a high-powered flight on Thursday as it shot to an intraday trading high of $101.29. The ETF later settled with gains of 13.25% at $99.90 – by then, the market had already made its point, gold is on the rise and there’s not much you can do to stop its ascent. The yellow metal has been on a bullish ascent since Monday and Thursday marks the fourth straight session of gains. The reasons behind the rally in the bullion markets are not farfetched. High on the bullish factors supporting a rally in the yellow metal is the fact that the U.S. Federal Reserve did not raise interest rates in April and the first rate hike might not happen until June. The second reason for the rally was the fact that the Bank of Japan has surprised the global market by keeping its interest rate unchanged in sharp contrast to expectations that BOJ would retreat deeper into negative territory. Gold climbs for fourth straight session The decision of the fed to keep interest rates unchanged, its cautious stance, and the refusal of the BOJ to weaken the Yen has forced the U.S. dollar to fall lower. A weak dollar often boosts the prospects of gold and the yellow metal is milking all the gains in the greenback for what it is worth. On Thursday, spot gold climbed 1.6% to settle at $1,266.50 an ounce and gold for June delivery gained 1.6% to close at $1.266.50 an ounce. In the year-to-date period, the yellow metal has gained 17.14% to erase the losses that it recorded in 2015. NUGT has gained a massive 310.6% in the year-to-date. The rally in gold slowed down at the start of the second quarter – in the last one month, the yellow metal has gained 1.70% and Thursday’s gains records the highest closing price in the bullion since March 10. It is worthy of note that analysts seem to think that gold had reached a bottom last year and that the rally will continue for much of this year. For instance, George Milling-Stanley, strategist at State Street Global Advisors notes that “in the continued absence of any surprises from policy makers, the gold price could still see further gains in 2016… A price of around $1,350 by year-end could be sustainable.” Nonetheless, I wouldn’t be surprised if the yellow metal runs into occasional volatility that pull the price down. Crude oil also benefits from weaker dollar The weaker dollar has lifted gold and NUGT – but it is also lifting crude oil in global trade. Yesterday, crude oil had more reasons to climb partly because the prospects of a production freeze by OPEC and Russia looks brighter and partly because the BOJs economic policy has weakened the dollar. U.S. West Texas Intermediate (WTI) Futures gained 1.5% to settle at $46.03 and Brent crude gained $0.93 to $48.11 per barrel nearing its highest point since November last year. Dominick Chirichella, a senior partner at the Energy Management Institute observes “the perception view crowd are starting to call the oil market rally the beginning of what will be a long bull market… Clearly, the market is primarily focused on the forward supply-and-demand picture while continuing to push the bearish nearby fundamentals further into the background.” Link to the original post on Learn Bonds

Forget Gold; Buy Silver Mining ETFs Instead

While broad-based global growth worries in Q1 and the Fed’s dovish stance in the March meet stalled the strength in the greenback, it spread joy within broad-based commodity investing. Most investors focused on gold taking cues from the Fed’s dovish comments over rate hike. Another corner of the precious metals world – silver – has also done quite well lately. The white metal has seen extremely solid trading in recent times and touched a 10-month high on April 19 owing to some disappointing economic data, mainly from the U.S. The jump was so acute that silver has actually breezed past the yellow metal. Most market participants have now started to expect that the Fed will not act on policy tightening again before the second half of 2016 given persistent volatility in the oil patch, corporate earnings weakness and sluggish U.S. market recovery. All these are likely to keep the greenback soft in the coming days and precious metals strong. Renewed tension in the oil patch after the output freeze deal in Doha failed may also bolster the need to invest in safe havens like silver and gold. Also, silver might see an output crunch ahead, as “Zinc miners have announced production cuts resulting into a proportionate decline in silver output as well, silver being a byproduct of zinc,” going by Business Standard . Apart from this, silver has high usage in industrial activities, with about 50% of total demand coming from industrial applications. With China, the biggest industrial fabricator after the U.S., gaining traction on manufacturing activities, silver might continue to see smooth trading in the coming days. Plus, a pickup in global industrial activities is expected ahead, thanks to a host of stimulus measures in various parts of the globe. Silver Mining Vs. Gold Mining? Whatever the case, the ultra-popular gold bullion exchange-traded fund SPDR Gold Trust ETF (NYSEARCA: GLD ) lost about 0.4% in the last five trading days (as of April 19, 2016), while silver bullion fund iShares Silver Trust ETF (NYSEARCA: SLV ) advanced over 4.7% during the same time frame. Actually, many investors have started to view silver as a leveraged play on gold, as per ETF Securities. Investors should also note that the silver mining industry , at least in terms of its Zacks Industry Rank, is in a decent position, having been ranked in the top 5% overall. Many silver mining companies are presently top-rated as per the Zacks methodology. Investors can tap the surge in silver demand by investing in silver mining ETFs, which often play as a leveraged version of the underlying metal. The case appears to hold true for silver as well. Silver mining funds, including the Global X Silver Miners ETF (NYSEARCA: SIL ), the iShares MSCI Global Silver Miners ETF (NYSEARCA: SLVP ) and the PureFunds ISE Junior Silver ETF (NYSEARCA: SILJ ) gained about 9.9%, 11.9% and 16.3%, respectively, during the last five trading days (as of April 19, 2016). The trio hit a 52-week high on April 19, 2016, with SILJ, SLVP and SIL adding about 10.6%, 9.6% and 9.2%, respectively. On the other hand, gold mining ETFs like the Market Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ ), the Sprott Junior Gold Miners ETF (NYSEARCA: SGDJ ) and the Market Vectors Gold Miners ETF (NYSEARCA: GDX ) added 7.5%, 5.8% and 4.9%, respectively, on April 19, 2016, though even these hit 52-week highs. Bottom Line It seems buying pressure is intense in the silver mining ETF space, and given the pushback (apparently) in the Fed rate hikes, extra buying is likely. As a caveat, we would like to note that this way up in commodities may be short-lived. Also, silver prices are often more hit than gold when things are against precious metal investing. Thus, risk-loving investors might go for this momentum play and hoard as much gains as possible till the party is on. Original Post