Stocks rolled over on Monday after an historic decline in oil prices. The losses in stocks were steep, the Dow lost 592-points, giving back a good portion of Friday's 705-point gain. The price of oil actually fell into negative territory in the May futures contracts. And we thought that could only happen to interest rates.
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Yes, you heard that right. The price of oil plummeted into negative numbers yesterday - at least the May Futures Contract did. The June Contract remains above $20, but that was also down 15% on the day.
Obviously the demand for oil has decreased dramatically since the shutdown of the economy, and with the shutdown now scheduled to move into May, that demand for oil should stay quite low, and that is why the May futures contracts, which expire today I believe, plummeted. They can't get anyone to buy it. There may be a light at the end of the tunnel for the economy, so June's futures price, while still quite low, is near $21 a barrel.
The stock market reacted, but maybe not as much as we might have expected. I remember back in late January when the coronavirus was first making headlines, and we did see some rumbling in the stock indices for a few weeks, but it took those few weeks before investors woke up to what the virus was going to do to the economy, and of course the reaction was extreme by March.
Negative oil prices seems unusual, and of course since we have never seen it before, perhaps investors aren't fully understanding what it means. I know I don't fully comprehend what it's telling us, but we may find out soon enough.
We're starting to see some cracks in some of the stock index charts as the bear flags, which are all over the charts, broke on some of them. The Transports and the EFA (I-fund) charts look the most vulnerable if the bulls don't step up quickly.
The S&P 500 (C-fund) closed with sharp losses, but like last week, even the big losses didn't completely erase the prior trading day's gains. There was a small open gap just above the 50-day EMA and that remains slightly open. The 50-day EMA has held for a second straight day, and 3 of the last 5 days. There is still overhead resistance so we have a bit of a test coming up in the next few days as that resistance meets that 50-day EMA support.
The DWCPF / S-fund also tried to fill in Friday's open gap after it retreated from the 50-day EMA. That still looks like an obvious bear flag to me, and since they do tend to break down, I expect any upside move above 1200 to be a tough job for the bulls, and the bears may have an easier path to 1100.
The Dow Transportation Index is also in a form of a bear flag as the rising wedge off the lows gets more narrow. Yesterday's lows cracked the bottom of that bear flag and it's getting close to a breakdown. If it does break, the technical downside target would be well below 6500 so the bulls may want to get busy if they want to prevent that.
The EFA / I-fund chart did break down from its bear flag. It did so last Thursday as well, but Friday's rally pushed it right back into the flag. This may be a good gauge or what the U.S. indices are going to do, so keep an eye on this chart during the day.
The BND / F-fund was off slightly but it remains near those all time highs.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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Yes, you heard that right. The price of oil plummeted into negative numbers yesterday - at least the May Futures Contract did. The June Contract remains above $20, but that was also down 15% on the day.
Obviously the demand for oil has decreased dramatically since the shutdown of the economy, and with the shutdown now scheduled to move into May, that demand for oil should stay quite low, and that is why the May futures contracts, which expire today I believe, plummeted. They can't get anyone to buy it. There may be a light at the end of the tunnel for the economy, so June's futures price, while still quite low, is near $21 a barrel.
The stock market reacted, but maybe not as much as we might have expected. I remember back in late January when the coronavirus was first making headlines, and we did see some rumbling in the stock indices for a few weeks, but it took those few weeks before investors woke up to what the virus was going to do to the economy, and of course the reaction was extreme by March.
Negative oil prices seems unusual, and of course since we have never seen it before, perhaps investors aren't fully understanding what it means. I know I don't fully comprehend what it's telling us, but we may find out soon enough.
We're starting to see some cracks in some of the stock index charts as the bear flags, which are all over the charts, broke on some of them. The Transports and the EFA (I-fund) charts look the most vulnerable if the bulls don't step up quickly.
The S&P 500 (C-fund) closed with sharp losses, but like last week, even the big losses didn't completely erase the prior trading day's gains. There was a small open gap just above the 50-day EMA and that remains slightly open. The 50-day EMA has held for a second straight day, and 3 of the last 5 days. There is still overhead resistance so we have a bit of a test coming up in the next few days as that resistance meets that 50-day EMA support.
The DWCPF / S-fund also tried to fill in Friday's open gap after it retreated from the 50-day EMA. That still looks like an obvious bear flag to me, and since they do tend to break down, I expect any upside move above 1200 to be a tough job for the bulls, and the bears may have an easier path to 1100.
The Dow Transportation Index is also in a form of a bear flag as the rising wedge off the lows gets more narrow. Yesterday's lows cracked the bottom of that bear flag and it's getting close to a breakdown. If it does break, the technical downside target would be well below 6500 so the bulls may want to get busy if they want to prevent that.
The EFA / I-fund chart did break down from its bear flag. It did so last Thursday as well, but Friday's rally pushed it right back into the flag. This may be a good gauge or what the U.S. indices are going to do, so keep an eye on this chart during the day.
The BND / F-fund was off slightly but it remains near those all time highs.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
