Stocks stabilize as crude oil prices rise :: InvestMacro


US stock futures rebounded this morning on the news that China will reduce quarantine time for foreign travelers. This comes as Wall Street pared its gains after the initial rally from stronger than expected US durable goods data.

Meanwhile, there is more action in the oil markets as crude extends its recent gains due to supply disruptions.

The benchmark S&P500 index ended Monday 0.3% lower, after a turbulent day of trading in which the index slowly gave up earlier gains. The broad index is still down about 18% for the year.

Technically, the S&P500 was trading at the bottom of a descending channel after the highs at the end of March.

Prices have also been in oversold territory on the daily and weekly charts with the RSI down towards 30. We have taken the rebound above the May low at 3811.1 and the bulls are now challenging trendline resistance from the October 2021 low.

Above is the key psychological level at 4000 with the 50-day simple moving average at 4028.4.

Crude oil bounces off trend line support

Oil prices had their worst week since early April, with Brent crude down more than 7% over the past week.

Concern about the overall outlook has had a significant impact even though the fundamentals remain constructive. The G7 nations are meeting at the moment, and discussions about a possible price limit for Russian oil appear to be on the agenda. It is suggested that any limits be worked out through insurance and shipping.

However, it will likely take some time to reach an agreement and will require the EU to renegotiate the latest round of sanctions that some member states may be reluctant to do, given how long it took EU countries in the first place to end the Russian oil embargo.

OPEC members are scheduled to meet tomorrow at an OPEC + ministerial meeting on Thursday.

The cartel had already agreed at its previous meeting to increase the supply in July and August, so it is expected that the increase in the supply for August will be confirmed.

After dropping sharply from an early-month high of $123.27, Brent crude found support last week at an uptrend line touching the March, April and May lows. The 100-day simple moving average also helped lift the price and is currently at $107.76.

We are now trading just above the 50-day simple moving average at $111.64 with bulls eyeing the $114 resistance level that had capped Brent prices for most of the April-May period.



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