There’s a Better Place to Invest Than Big-Cap Energy

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Stocks forged ahead on Wednesday, led by the small-cap Russell 2000, which was up 0.8% and hit a record closing high. Large-cap stocks advanced as well, with the Dow industrials up 0.4% and the S&P 500 gaining 0.5%. The Nasdaq, which represents the mid-cap group, rose 0.7%.

A weaker U.S. dollar, higher energy prices and a few pleasant surprises in earnings were said to be catalysts for the gains. The energy sector rose 2.4% as crude oil futures gained 5.8% to $56.39 a barrel.

Delta Air Lines, Inc. (NYSE:DAL) jumped 2.6% after the company said Q1 earnings more than tripled, beating analysts’ expectations. Intel Corporation (NASDAQ:INTC) rallied 4.3% after reporting a 3% rise in net income late on Tuesday. This helped push iShares PHLX SOX Semiconductor (NASDAQ:SOXX) up 1.7%.

The euro rose slightly versus the U.S. dollar. And gold for June delivery gained 0.7% at $1,201.30 an ounce. The rise in gold was attributed to new concerns over Greece’s financial woes. The yield on the 10-year Treasury note fell slightly to 1.9%.

At Wednesday’s close, the Dow Jones Industrial Average gained 76 points at 18,113, the S&P 500 rose 11 points to 2,107, the Nasdaq gained 34 points at 5,011, and the Russell 2000 jumped 10 points to 1,275.

The NYSE’s primary market traded 877million shares with total volume of 4 billion. The Nasdaq crossed 1.8 billion shares. On both major exchanges, advancers outpaced decliners by about 2-to-1.

XLE Chart
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Chart Key

Large-cap oil stocks are the heavyweights in the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE).

Note that despite the support from a bullish saucer and the break of its bearish resistance line, volume is declining and MACD is overbought. XLE has changed direction but will probably require a rest before attacking its 200-day moving average at $85.71.

Russell 2000 Chart
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The Russell 2000 blasted to a new closing high, pulled higher by small-cap oil and oil service stocks (see the Trade of the Day). Even though the index is due for a breather, it has a lot of support — the old high at 1,268, the support line at 1,245, and the December high at 1,220.

The intermediate uptrend line and 50-day moving average intersect at about 1,236. Although MACD is flat, it is not overvalued, so the index could continue to pick up momentum.

Conclusion

The primary driver of the Russell 2000 is technology stocks and now small-cap energy stocks.

For several weeks, I’ve been focusing on small-cap oil stocks and ETFs in the Trade of the Day. I especially like small-cap Canadian energy stocks because the country’s currency is moving up with the price of Canadian oil. This gives investments like Crescent Point Energy Corp (NYSE:CPG) (see here) and the Guggenheim Canadian Energy Income ETF (NYSEARCA:ENY) (see here) an edge over the big caps of XLE.

The worn but true Wayne Gretzky quote, “I skate to where the puck is going to be,” has fresh, as well as profitable meaning.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/daily-market-outlook-theres-a-better-place-to-invest-than-xle/.

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