This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Global Macro: The Return of the Energy Sector

NEW YORK ( TheStreet) -- With the large sell-off in defensive stocks due to fear of U.S. rate hikes, there is a need to find the new outperforming sector going forward. With an improving economy, the Federal Reserve hopes to cut back on stimulus, this will at first have negative side effects but eventually be beneficial to all.

The sector that looks primed to outperform is energy. The pair below is of Energy Select Sector SPDR (XLE) over S&P Equal Weight ETF (RSP). This pair measures the energy sector's relative strength to the broader market and could break out if things go accordingly.

The pair has been in a long downtrend as the global economy has deteriorated and inflation expectations have become nil. The case that this pair will outperform in the short run is a tough call, but if the economic landscape begins picking up worldwide, and GDP follows, energy could be a leading sector.



The next pair is of CurrencyShares Australian Dollar Trust (FXA) over CurrencyShares Japanese Yen Trust (FXY). The Aussie Dollar is a commodity currency that tracks the movements of such assets like oil and copper. China's weakness has weighed heavily on the pair, as are RBA rate cuts and weaker than expected Australian GDP.

The BOJ is continuing its monetary efforts and this should soon be reflected again in the price action. The yen should pick up weakness and the Aussie dollar resume strength. An improvement in both oil and copper will help the move as well.





The last pair looks at United States Oil Fund (USO) on a technical basis. The strategy used of looking at patterns in the commodities sector is much needed due to the volatile nature of the asset class itself, and can be quite accurate over time. Oil will shoot higher on stronger economic prospects and potential geopolitical occurrences. The U.S. and Japan are the two economies that show the best prospects for near term improvement. China has had its difficulties, but could very well improve by end of 2013 or beginning of 2014. Increased sentiment surrounding economic data worldwide could lead to a breakout in the chart of oil below and propel both the Aussie dollar and U.S. energy sector higher.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FXA $77.68 0.00%
FXY $81.59 0.00%
RSP $80.66 0.00%
USO $17.14 0.00%
XLE $76.40 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs