Crude Oil And Equities Back In Sync?

Tuesday, March 6, 2018, 12:00 PM, EST

  • NASDAQ Composite +0.2% Dow -0.4% S&P 500 -0.18% Russell 2000 -0.03% S&P MID 400 +0.14%
  • NASDAQ Advancers: 1141 Decliners: 1080
  • Today’s Nasdaq Volume (100 day avg.) +5%

US stocks opened on the same path we witnessed during the second half of yesterday’s session, helped this morning by the news that North Korea is open to suspending nuclear tests and holding talks with the U.S. (+0.8%) and Information Technology (+0.64%) are the best performing sectors today, which is enough to offset the steep declines from the Utilities (-1%) sector. Halfway through the trading day, the Dow and S&P 500 erased its morning upside, while Nasdaq remains in the green. January Durable Goods (-3.6%) and Factory Orders (-1.4%) were as expected.

  • Since last Thursday, Semiconductors stocks are up ~4% helped by bullish analyst commentary. Yesterday, BofAML released a report citing strong chip sales in January should support further gains for the group. Micron rallied by 6% yesterday and up another 4% this morning after a Goldman Sachs note that suggested increasing DRAM pricing should push MU’s quarterly results (released 3/18) above consensus expectations.
  • Trump’s plan for tariffs on steel and aluminum has hit a snag over the past 24 hours, as several politicians close to the president have voiced a dissenting opinion on the topic. House Speaker Paul Ryan believes the tariffs may be initiate negative consequences with US trade partners. WH Advisor Gary Cohn is also a leading voice against the tariffs and there are rumblings that this disconnect might force Cohn to step down from his position. According to CNBC’s Jim Cramer, if Cohn steps down, the news will send US stocks markets significantly lower.

Technical Take

Crude oil and equities appear to be trading in sync these days. As the Dow Jones Industrial Average corrected 12.2% from the January highs to February lows, crude (WTI) saw a near identical decline of 12.9%. Both the Dow and crude bottomed on February 9th, and from there rallied to make a closing high on February 26th. Both rebounds stalled just shy of their 76.4% Fibonacci retracement of the prior downtrend, always a potential resistance line. For WTIO crude this lower high at $64.24 stalled right at the underbelly of the uptrend line originating in August 2017 (white arrow). After a brief three-day pullback crude made another push higher but is today stalling at the downtrend line connecting the two pivot highs in February. Zooming out from the choppy corrective price action, crude is forming a triangle price pattern of lower highs and higher lows. The prior uptrend favors an upside resolution, however a retest of the February lows, and potentially a lower low, is always a possibility. The key near term support-resistance levels to focus on is $60 - $64.25.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director 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.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

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.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT is a 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).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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