Crude oil prices fell nearly 10% on Monday morning as OPEC+ and Russia postponed an urgent oil meeting to 9th April, adding uncertainty to the potential output cut deal.
Traders are quickly unwinding the prospect of a big deal and profit-taking activities are starting to kick in. The energy sector is likely to get hammered today. Last week, the WTI oil price surged a total of 40% following President Trump’s tweet and subsequent acknowledgment of a potential deal by the world’s largest oil producers.
Technically, WTI-Cash has pierced through its 50% Fibonacci Retracement at US$ 27.9 before pulling back to the 38.2% Fibonacci Retracement level of US$ 25.9 this morning. Some consolidation between US$ 22.0 to 25.9 could be seen in the days to come, while traders await fresh updates from Saudi, Russia and the US Shale Oil industry.
The S&P 500 futures advanced 1.7% on Monday morning, signalling a sobering day for Asia trading. Despite a collapse in last Friday’s non-farm payroll number, which came in at -700k, the market seems to be more forward-looking. Signals are showing that the fatality rate in the EU has stabilised and declined, while the market anticipates effective medicine in treating Covid-19 to be released in the foreseeable future.
Technically, the S&P 500 index has likely formed a ‘higher low’ as it holds above a key support level of 2,450 points last week. Immediate resistance level could be found at 2,646 points, a recent high. In the mid- to long-term, however, the recent rebound could just be a ‘false rally’ in a prolonged bear market due to fundamental damage brought on by Covid-19 which will need a long period of time to recover; and it is still too early to call it a ‘peak’ yet.
Similar technical pattern applies to the Hang Seng Index, which has found support at around 22,500 points recently, but face strong resistance at 23,640 points (38.2% Fibonacci Retracement). As the macro picture deteriorates sharply around the globe, small and open economies like Hong Kong and Singapore are likely to get hit the most.
The Singapore government has decided to shut schools and non-essential business activities from this Wednesday (8th April) onwards, entering into a so called 1-month ‘circuit breaker’. Singapore stocks are set to rebound from last Friday’s heavy losses, even though lower oil prices are likely to dampen sentiment in its oil & gas industry.
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Margaret Yang Yan