Crude oil might have hit the gas pedal, but equity investors have been left on the sidelines as energy stocks continue to struggle even as the price of crude rallies. Energy stocks seem like an easy way to play the recovery in crude prices, but the disappointing performance of most energy funds tells a different story.
It ’s often a complicated question, and when it comes to markets, the “why” often takes a backseat to the “what” that is happening and “how” it should be traded. Nonetheless, it can be worthwhile to understand why a market relationship occurs, so that you can adjust more quickly than the competition when the relationship inevitably changes.
The crude oil sell-off was just downright crazy. Oil got caught up in trade war fears, tech wreck fears, OPEC/Non-OPEC compliance fears, and a build in Cushing, Okla., oil stocks, as reported by Genscape. Stocks had the worst start to April since 1929, but really the magnitude of this sell off was a big April’s Fools Day joke that just one day late.
Friday’s session was strong as expected and the S&P traded to a session high of 2659.50, up almost 2%. However, in the last 30 minutes, ahead of the long holiday weekend and the end of the quarter, the footing was less firm with the electronic session closing nearly 1% from the high.
Crude oil prices are on the rise after Baker Hughes reported the U.S. oil-rig count fell by 7 to 797 rigs. After recent increases that might not seem like a lot, traders now know that to keep U.S. shale production rising you must keep on drilling. Steep shale decline rates means you can’t let up or production will start to ebb and fall.
Equity markets are green this morning and trying to set a tone for the last day of the quarter. All eyes have been on the 200-day moving average lurking just below at 2588.25 today and yesterday was yet another failed attempt to take it out. We expect this consistent hold to shift the fear in the market into value seeking as money managers and funds look to put some dollars to work in an attempt to make the quarter look, well, not so bad.
For beach party breakouts, soybeans, gold, and the British pound have higher narrow-range pivots inside each other for next week and month constituting a pivot breakout mix on multiple time frames- could a strangle/straddle apply? For a milder breakout story, crude has higher inside pivots for next week, and lower inside weekly pivots for next week are in the S&P 500 and inside lower monthly pivots in Bitcoin.
Monday was a great recovery but major three-star resistance at 2670 became tougher and tougher to hold as the day developed. Additionally, signs of yesterday’s selloff were budding through the session fundamentally and technically. Technology was lagging hard with the likes of Tesla and NVIDIA. Facebook continued to weigh on market sentiment and price.