Thursday, June 13, 2019, 12:31 PM, EST
- Stocks mixed to higher in another lackluster session
- WTI Crude Oil prices higher by about 3% after two tankers were attacked in the Persian Gulf
- Initial jobless claims last week were 222,000, a five week high vs. 215,000 estimated
Stocks rose this morning despite attacks on two oil tankers near the Persian Gulf that could raise tensions in the area. European stocks were higher heading into the trading session. After two days of modest declines, stocks seemed ready to move marginally higher.
Equities seem to be in a holding pattern ahead of next week's FOMC meeting. Heading into this week stocks moved up or down triple digits on seven of nine sessions (one less than normal due to Memorial Day). This week, we've seen a 78 Dow point gain, a 14 point loss, a 43 point loss and today so far, a roughly 30 point gain. Bulls (rates) and Bears (trade) seem to have fought to a stalemate and are awaiting new news.
Oil had its largest increase in both percentage and dollar terms since January and is currently up $1.56 to $52.70 after a Japanese and a Norwegian vessel were damaged by attacks in the Persian Gulf. The Norwegian ship was reportedly damaged by an explosion and the Japanese ship was "struck" twice, the first causing a fire in the engine room that was extinguished and the second hitting the center of the vessel resulting in the evacuation of the ship. All of this raises tensions in the area. Still, there has been plenty of supply, and concerns over slowign global growth have pressured the commodity. Oil has generally been declining over the past month and was above $60 just a few weeks ago.
As noted, part of the reason for oil's decline has been a fear of a global slowdown exacerbated by trade tensions. U.S. economic data has been sluggish. Import prices today fell 0.3% in May vs. the 0.2% decline expected. Stripping out petroleum, the import prices were the same. Initial jobless claims ticked up to 222,000 vs. 215,000 expected. This is a five week high for this somewhat noisy data series. Continuing claims also rose to 1.695 million against 1.660 million expected.
Energy stocks are leading all sectors with a 1.1% gain as oil prices
rise. Other growth sectors like Communications Services, and Technology are among the leaders with safety stocks like Utilities, Staples and Real Estate lagging. Healthcare (J&J/opioid liability and big cap pharma) is the worst performing sector.
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Brian's Technical Take
Crude oil (WTI) gained as much as 4% today after two oil tankers were attacked near the entrance of the Persian Gulf reigniting fears of a potential military conflict between the U.S. and Iran.
Today's rebound follows yesterday's 4% decline whereby WTI made its lowest YTD close, $51.14, in 2019. This qualifies as a "retest" of last week's intra-week lows at $50.60, and thus sets up a POTENTIAL "double bottom" reversal pattern best seen on the daily period chart. Following a 24% decline from the April highs, the location of this potential bottoming is taking place across the 61.8% Fibonacci Retracement of the December to April uptrend which makes it all the more interesting.
While the possibility of a meaningful low exists, it is not without risk as plenty of technical concerns remain. The daily period moving averages are crisscrossed and most are sloping down. Momentum is poor with the daily RSI bottoming last week at an extreme 21 reading, while the weekly RSI, now 38, is making fresh YTD lows. Also, last week's bottoming candlestick ("hammer") is not yet being confirmed by this week's price action which is currently forming a "bearish engulfing" pattern. In regards to the bearish engulfing pattern, there is still plenty of trading left in the week and it would only take a 1.5% gain from last sale to negate it and see it morph into another hammer candlestick.
At the end of the day WTI is a key inflection point here. Having already declined 24% since April, the more favorable risk-reward for new entries may actually be on the long side. Fresh longs can use the YTD low from last week, $50.60, as a reference point to establish a stop exit and thus clearly identify one's risk and appropriate position size. A breakdown to fresh YTD lows carries risk to the $42 - $43 range, down roughly 20%, where WTI has bottomed on numerous occasions since Q4'16. Tomorrow's close and this week's pattern will be most interesting.
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Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.