The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Oil
Risk-off moves began around 7 AM this morning and gathered momentum until about 2 PM. Headlines and news continue to be the usual mix. There were no shocking instances that grabbed market attention. There was simply the constant drip of the stories regarding Iran, private credit, and software/semiconductors. Throughout the US day, crude oil prices climbed. As crude climbed, stocks fell. At 3 PM, crude began to back off and stocks began to recover. This was in response to an announcement from the US Treasury that that could take measures to combat energy prices. Yields continue to climb across the Treasury curve and the Dollar strengthened. Capital flow was modestly elevated at 120%.
The Straits of Hormuz remain effectively closed. I don’t know when the first tankers will attempt to pass but it will be newsworthy. That bottleneck appears to be pressuring the overall crude market and subsequently, all risk assets. Whether this is logical or not, I’m not so sure. The market presently views climbing oil prices, even if a transient situation, as cause for risk-reduction. Until the market feels differently, this will be the primary impetus for other markets’ reactions.
For the short term, everyone’s portfolio is indirectly long or short oil. Perhaps that fact also leads to some groups of investors derisking. When the oil pressure lets up is anyone’s guess. Certainly there are many markets out there that don’t want to have to wait it out, even though they will have to.
Most markets *should* be thinking/preparing for tomorrow’s February nonfarm payrolls data (+55k est vs +130k est). The other topics of the moment are pushing this normally front-and-center data to the side of the stage. I expect that the release will shake things up at the 8:30 AM release but soon thereafter, we will all be watching crude again.
The short-term bottom for the S&P remains Tuesday’s intraday low of 6710. Today’s low of 6770 is a bit higher than that. Bullish technicians will point to higher lows as an encouraging fact pattern for the upside. It’s not a slam dunk case but it’s the only technical case they’ve got right now. If Friday delivers a rally, all the bullish technical conclusions will seem stronger. If the S&P goes below 6710, the bearish technicians will be declaring victory.
See you tomorrow.
-Mike
Visdom Market Commentary
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