SPX futures have recovered with a strong open and that is problematic as the short term outlook may be forced to switch back to neutral as soon as today. The one day selloff yesterday was also good enough of a retracement to justify building a bull case to go along with the bear case later this week as there are less hurdles in the way.
Geopolitics are becoming more of the landscape as situations in the Ukraine, Venezuela continues to stay tense, and the one commodity that is sensitive to geopolitical news is crude oil. Sustaining high prices in crude usually means higher prices at the gas pump, so it’s worth a look at the technical picture. The chart directly below shows crude oil locked in a huge coiled spring as represented by the monthly Keltner/Bollinger volatility squeeze. Also note the correlation with the EEM price (emerging markets) to oil. It appears EM consumption drives oil prices and while there will be short term noise, the EEM-oil correlation should stay intact – absent of a serious geopolitical breakdown. Additional crude analysis is at the bottom of today’s post.
S&P 500 (SPX) SHORT TERM OUTLOOK: BEARISH
Back to neutral if SPX closes above 1859.02. (Note: The SPX has already punctured new highs suggesting a premature change to neutral)
With the hard higher open, the bull case will emerge later in the week if the SPX holds in a range. Volatility still reigns, therefore, if the daily outlook can flip to bearish today, the 4 hour chart has a decent chance to complete a long awaited TD Buy Setup.
S&P 500 (SPX) SHORT/INTERMEDIATE TERM OUTLOOK: NEUTRAL
Flip to bearish if SPX closes below 1845.16.
Yesterday’s close was high enough to maintain the neutral outlook. The bearish trigger level is only slightly revised from yesterday from 1945.12 to 1845.16. Now note there is still an active TD Sell Setup currently on bar 7. If this continues, this sets up an intriguing end of the week when non-farm payrolls are released.
S&P 500 (SPX) INTERMEDIATE/LONG TERM OUTLOOK: NEUTRAL
Flip to bearish if SPX weekly closes below 1797.02 (updated February 24th).
S&P 500 (SPX) LONG TERM OUTLOOK: BULLISH
Flip to neutral if SPX closes below 1805.81 on the last day of March (updated March 3rd).
CRUDE OIL UPDATE: Light Sweet Crude Oil Futures (CL_F)
Coming up on an important resistance area.
On the last update on crude oil from July of last year, crude was on a TD Sell Setup @6 and back then it was surmised that since the weekly Keltner/Bollinger volatility squeeze fired off, the monthly squeeze would follow. What really happened was crude topped out at TD Sell Setup @9, reversed and tested the 91.26 TDST Support with a deep retracement before reversing to the upside again, compressing the monthly coiled spring even tighter.
From the daily and the weekly charts, there are two resistance hurdles for crude. The daily TDST Resistance at 104.08 has been taken out but it is also close to recording the first of two competing TD Sell Countdown/Combo Sells. The most bullish scenario would see crude try to work off the pending 13’s and continue to to test the weekly TDST Resistance at 108.60. The weekly will be the most determinant factor of where crude will head next. If crude continue to surge above 108.60, a huge volatility squeeze may just be starting to propel oil even higher.