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“After a half century in the oil and gas business, I’ve learned a lot of lessons. Few have been cheap.” – T Boone Pickens

Morning stock market summary

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The negative tone in futures this morning is largely attributable to the negative reaction to Oracle’s (ORCL) earnings after the close on Monday. The stock is trading down over 10% which put the stock on pace for its most negative reaction to earnings since December 2011.  Besides ORCL, the focus is on Apple (AAPL) which will unveil the new iPhone early this afternoon. In economic news, the only report on the calendar was the NFIB report on small business sentiment.  The headline index for that report came in slightly weaker than expected (91.3 vs 91.5) and declined modestly from last month’s reading of 91.9.

In yesterday’s email, we noted the absolute and relative strength of the Energy sector in the first five trading days of September.  When the opening bell rang on Monday, it looked as though that strength would continue to start the week.  Within the first few minutes of trading, the Energy sector was up just under 1% and trading at a YTD high, but from there it ran out of gas and proceeded to drift lower all day. By the time they rang the closing bell, the Energy sector finished the day down well over 1%.

When a stock or index makes both a higher high and a lower low relative to the prior day’s range, technical analysts refer to it as an outside day, and it is considered a signal of a potential reversal in the prior trend. The actual record of these patterns playing out as expected is mixed, but we would note that the S&P 500 had a similar outside day right at the high in late July and has yet to get back to those levels in the seven weeks since.

Getting back to the Energy sector, in its history since 1990, yesterday was just the sixth time that the sector had an outside reversal day that was comprised of an intraday high of at least 0.5% relative to the prior close but where it closed the day down over 1%.

In today’s Morning Lineup post, we looked at how the sector performed following prior reversals like Monday’s, and if you sign up for a two-week trial to Bespoke Premium to you can check out the full details.

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