US equity futures lost 1.5% on Monday morning, despite OPEC+ and Russia eventually striking a historic deal to slash output by as much as 10 million barrels a day to boost oil prices.
The crude oil market is always ‘buy on expectation, sell the fact’ and it was proven correct again. Even a 10 million bpd cut looks insufficient to offset the decline in global energy demand, which was estimated to top 20 million bpd.
Technically, WTI-Cash is consolidating between US$20.0 -$25.9 area. A mild rebound in WTI crude oil this morning is erasing part of last Thursday’s losses and the overall trend remains bearish-biased. As Covid-19 develops around the globe, especially in highly-populated emerging markets like India and South Africa, energy demand could be further dented and more output cuts within and outside the OPEC+ clan is needed to stabilize oil prices.
The S&P 500 index is challenging a resistance zone between 2,778 -2,920 points, and is about to form a ‘Gartley 222’ pattern (shown in the graph below). 2,778 is its 50% Fibonacci retracement and 2,920 is 61.8% retracement level. These indicators suggest that strong selling pressure is likely to accumulate as the markets attempt to move up higher from its current level.
Over the weekend we didn’t hear much of good news but climbing infection numbers around the globe, inferring that we are yet to reach a global peak. Due to the fluid nature of human migration, it is hard to assume that any country is safe before an effective medicine or vaccine is developed. Therefore, a prolonged period of border controls and supply chain disruptions are likely down the road, inhibiting consumption, service and manufacturing activities.
News that US and Japan are urging their corporates to shift their factories out of China to home or South East Asia is dampening sentiment in the Greater China markets. Shanghai Composite lost 0.35% this morning, extending a two-day decline. Hang Seng Index is likely to be under pressure tomorrow after resuming trading.
Australia, HK, EU and US markets are shut today for Easter.
US SPX 500 - Cash