While in general, the U.S.-China trade war may be seen as a net negative for the capital markets, traders have been embracing the volatility that’s returning. While the tariff-for-tariff war wages on, China could target U.S. oil next, which could make way for some interesting energy plays.
Per a CNBC report, “China is expected to dramatically reduce its intake of U.S. crude imports over the coming weeks, energy analysts have warned, following the latest flare-up in trade war tensions between the world’s two largest economies.”
“I think it is a virtual shoo-in that volumes will slow to a trickle and may even grind to a complete halt,” Stephen Brennock, oil analyst at PVM Oil Associates, told CNBC via email.
Just as the capital markets were responding to the upside on the heels of the 25-basis point rate cut by the Federal Reserve, U.S. President Donald Trump’s imposition of tariffs sent the markets back down. Oil prices saw their worst performance in four years, but opportunities could be ahead for energy ETFs.
For the markets hoping that future rate cuts could be on the way, Powell dashed their hopes by saying it wasn’t the trend, but merely a “mid-cycle adjustment.”
Trump’s announcement that a 10 percent tariff would be applied to another $300 billion worth of Chinese goods and China’s response with retaliatory measures sent the major indexes on a rollercoaster. If traders want to use this as an opportunity to jump into the energy sector, they need to pick their spots.
Two funds for traders to consider are the Direxion Daily Energy Bull 3X Shares (ERX ) for bullish plays and the Direxion Daily Energy Bear 3X Shares (ERY ) for bearish opportunities to take advantage of.
ERX seeks daily investment results equal to 300 percent of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
On the other hand, ERY seeks daily investment results equal to 300 percent of the inverse of the daily performance of the Energy Select Sector Index. Like ERX, the index ERY tracks is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
For more relative market trends, visit ETFdb.