foxex: Crude Oil Prices Jump Along with Small Cap Stocks

Monday, September 16, 2019

Crude Oil Prices Jump Along with Small Cap Stocks

Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Monday, September 16, 2019

1. As Crude Oil Spikes Stocks Show Mixed Signs: Large Down, Small Up

2. Investors Fight Risk with Risk

3. The Small-Cap Oil Stock with a Big Name Backer

Market Moves

The attack on Saudi Arabian oil fields drove crude oil prices higher over the weekend and added volatility to stock and commodity markets around the globe. The full effects of these events have likely not yet fully played out. With oil futures trading higher by thirteen percent on the day, stock market investors felt nervous enough to drive prices lower.

The S&P 500 large-cap stock index closed slightly lower, and the tech-heavy NASDAQ retreated by one-half percent to close the day's session. Surprisingly, one class of stocks closed the day higher, namely, small cap stocks. The Russell 2000 index closed the day .39% higher showing that investors seem to be willing to take on more risk even in the face of greater uncertainty swirling in the financial markets at large.

Investors Fight Risk with Risk

Any disruption in the world's energy markets, whether or not it comes with political unrest in the Middle East region of the world, is typically a sign of worry for the markets. A drone attack on Saudi Arabia's largest oil fields creating the largest disruption of energy supply since the Kuwait war in 1991 is likely to roil the markets for some time to come. With half of Saudi Arabia's oil production shut down (about five percent of the total world oil supply), the big surprise is that investors aren't in full on panic.

Instead, investors seem willing to take on more risky trades, perhaps seeking higher returns in the face of potentially stagnating profits from larger companies who now face higher energy and transportation costs. With small cap and micro cap stocks making notable gains while large cap index prices shrink slightly, it becomes apparent that investors are aggressively seeking opportunity. The intersection of these trends can be found in an interesting chart of a collection of small-cap oil and energy stocks (see below).

Small Caps Squeeze Higher as Momentum Unwinds

Building A Fortune: Jerry Jones And The Cowboys

The Small-Cap Oil Stock with a Big Name Backer

Among small-cap stocks staking a claim in the energy sector, Comstock Resources (CRK) shows eye-catching price action. Shares have actually doubled just since the beginning of September. The company is in the business of wildcat drilling a highly speculative and potentially lucrative investment.

Analysts recently realized that this company has access to a particular well it has tapped in the past, that of Jerry Jones' deep wallets. Jones has been reported as being willing to dump significant money into the company to insure its success (he held as much as 75% of shares at one point). With this information the shares have been on a hot streak, and the news of rising oil prices has only added fuel to the fire.

The Bottom Line

The oil price surge from a disrupted supply is making the markets nervous in broader terms, but in more specific ways are driving investors towards riskier investments. Small cap stocks rose along with oil prices today, prompting a look at small-cap energy stocks where a few surprising moves have occurred recently.

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