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ENERGY AND FINANCIALS JUMP ON FLAT MARKET DAY -- RISING OIL PRICE LIFTS OIL SERVICE STOCKS -- HIGHER BOND YIELDS PUSH BANK STOCKS SHARPLY HIGHER -- STRONGER FINANCIAL STOCKS HELP BOOST SMALL CAPS -- RUSSELL 2000 INDEX CLOSES ABOVE ITS 200-DAY LINE

DATE POSTED:September 9, 2019

RISING OIL PRICE BOOSTS ENERGY STOCKS...A jump in crude oil helped make energy the strongest sector on a generally flat market day. Chart 1 shows the Energy SPDR (XLE) climbing 2% to the highest level in a month (on rising volume), and showing upside leadership for the the first time in awhile. Chart 1 also shows the XLE starting to find support above its late December low which is an encouraging sign. It's now testing its first line of overhead resistance at its 50-day moving average (blue line); with even more overhead resistance at its red 200-day line. It still needs to clear both of those moving averages to signal a more important upturn. Today's strong chart action, however, suggests that investors may be doing some bargain hunting in the energy patch.

Chart 2 shows the VanEck Vectors Oil Services ETF (OIH) jumping more than 6% and on rising volume. A close above its blue 50-day line would be even more encouraging. A strong showing by the price of oil is the main catalyst pushing energy shares higher.

Chart 3 shows the United States Oil Fund (USO) gaining 2.6% today to end the day above both its 50- and 200-day moving average lines; it has also broken a falling resistance line drawn over its April/July highs. The fact that the latest rally started from above its December low is another encouraging sign for both the commodity and shares tied to it.

Chart 1


Chart 2


Chart 3

BANKS LEAD FINANCIALS HIGHER...Financial stocks were the day's second strongest sector behind energy. Chart 4 shows the Financial Sector SPDR (XLF) ending the day well above its 200-day line. A jump in bond yields certainly helped; and largely explains why banks had such a strong day. Chart 5 shows the KBW Bank Index jumping more than 3% today to the day above its red line for the first time in more than a month. Banks and oil service stocks were the day's two strongest stock groups. It makes some sense to see energy and financial stocks jumping together today. Any sign of a bottom in energy prices is potentially inflationary which would normally boost bond yields. That would be good for both energy and financial stocks.

Chart 4


Chart 5

SMALL CAPS ALSO HAVE A STRONG DAY...On a day when the S&P 500 Large Cap Index closed modestly lower, small caps were another standout performer today. Chart 6 shows the Russell 2000 Small Cap Index gaining 1.2% today, and ending the day on top of its red 200-day average for the first time in a month. That may have something to do with today's strong rebound in financial stocks. Financials are the largest sector in the RUT and have been one of the factors holding it back over the last few months. Today's strong action in both, however, suggests that their combined fortunes may be improving.

Chart 6