A Difficult Week Across the Board
Last week was a difficult one in markets. The Middle Eastern conflict, rising oil prices, and a disappointing monthly jobs report weighed on stocks, and U.S. indexes fell for the second week in a row.
Oil prices spiked more than 30%, major U.S. equity markets were down between 2% and 5%, international and emerging-market equities fell an even larger 5% to 10%, and 10-year government bond yields jumped 20 basis points (0.2%).
A Perfect Storm of Stagflation Fears
There was something of a perfect storm in markets last week. An oil price spike in the wake of the conflict in Iran sparked concerns over higher inflation, while a weak payrolls report added to fears on the growth side. Markets pulled back given this stagflationary mix, especially amid uncertainty over the willingness of the Fed to ease policy in this environment.
With oil shipments in the Persian Gulf’s Strait of Hormuz sharply curtailed, U.S. crude was trading around $91 per barrel late Friday afternoon, up from $67 a week earlier.
Index Performance and Key Movers
Specifically, the S&P 500 lost 2% and is now off 1.2% year to date. The Nasdaq lost 1.2% and is down 3.7% year to date. The PHLX Semiconductor Index saw its worst weekly performance, down 4%, since November.
Nonetheless, the S&P 500 is still higher by about 17% over the past year and remains just 3% below all-time highs.
The VIX, a short-term U.S. stock market volatility gauge, climbed sharply on Friday to the highest level since last spring’s tariff-related surge in volatility. The Cboe Volatility Index closed at 29.5 on Friday afternoon, up 48% from its closing level of the previous week.
Bitcoin may retest recent support levels after its rejection at the 50-day EMA. The first level of support may be $65,000, its current cost of production, and potentially $60,000, its recent low.
My Technical Read: A Potential Three-Month Top in the Making
Technically the indices seem to have formed potential three-month top patterns and are now teetering on the brink of a possible serious break in important support.
We are closely monitoring key support near SPX 6,720. Under 6,700-20 we may start a bigger slide to test lower levels near 6,630, and even 6,520. Currently, important resistance appears near the 6,885-6,900 zone.
In any case, as we always do at TheTechTrader.com, we will “Trade What We See, Not What We Think.”
HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com
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