Crude Oil – Oil Declines for a Seventh Consecutive Week
The price of Crude Oil has declined to its lowest level since June 2023, marking an almost six-month low. The price of Oil has now declined for a seventh consecutive week. Economists note the decline is also improving the prospects of the stock market. Stocks are taking advantage of the lower oil prices which may trigger lower inflation and a softer monetary policy. This week alone the price has declined by 6.5%, but what is driving the bearish trend?
The main two reasons the market is witnessing a lack of demand in the oil market is China’s latest poor economic data and the latest OPEC meeting. China’s manufacturing and services PMI read significantly lower than expectations and this week Japan also announced weaker data. China is the largest importer of Oil while Japan is the fourth largest. Therefore, poor economic data in these regions are likely to trigger downward pressure for Crude Oil.
To make matters worse for the Oil market, Moody, the credit rating industry, lowered the economic outlook for China from “stable” to “negative”. Since the downgrade, economists have advised the Chinese economy is not likely to witness a recession, but more likely stagnation. OPEC, on the other hand, were unable to come to an agreement on the production levels. Again, this had a negative effect on Crude Oil prices. Lastly, yesterday’s report from the American Petroleum Institute showed inventories rose by 9.594M barrels instead of a decline of 2.267M barrels. The inventories show higher than expected supply.
In terms of technical analysis, the price of Oil is trading within a downward trend and is currently hovering within a retracement. The retracement is currently measuring 1% in line with previous pullbacks and is currently showing no major upward momentum. Therefore, most indicators continue to signal a downward trend. If the price breaks below $69.69 and $69.59, sell signals will again potentially become active.
USA100 – Only 20% of Stocks Held onto Gains!
The USA100 fell by 0.57% during yesterday’s session and was the weakest of the top 3 most popular US indices. When looking at the NASADAQ’s top ten most influential stocks, only 1 stock stayed in the “green”, this was Tesla which only slightly rose by 0.27%. Out of the top 20 most influential stocks, only 20% retained their value. The stock which saw the largest decline was NVIDIA which dropped 2.28%.
However, fundamental factors continue to point towards a positive outlook for the US tech sector. This morning the US Dollar Index is declining, 52% of market participants believe the Fed will cut rates in March 2024 and most of the components witnessed positive earnings data. The only slight concern for investors is bond yields which have risen over the past 24 hours. However, bond yields continue to remain significantly lower than in the previous months, which is positive for the stock market.
Technical analysts have pointed out that the index is not within a short-term downward trend and each time the USA100 declines, buyers re-enter the following day to take advantage of the lower price. Investors will again be monitoring if the index rebounds today. The stronger performer in the pre-market hours is Alphabet which has risen 0.82%. Alphabet stocks make up almost 6% of the overall index. Investors are currently balancing the negative effect of a weaker Chinese economy and the positive effect of a rate cut as early as March 2024. If the price increases above $15,873, the USA100 will again experience buy signals. Buy signals can be seen from the regression channel and crossovers.
