Market Insight – Oil prices continue to rise on Supply concerns and a drop in Stockpiles

Market Insight – June 8th, 2022.

• S&P500 – Improving sentiments and Asia Stocks on the Rise.
• Oil prices continue to rise on Supply concerns and a drop in Stockpiles
• US CPI Report this Week and ECB Ready to end Stimulus?

S&P 500

On Wall Street, S&P 500 gained 0.95% or 39.25 points. And the Dow Jones Industrial Average rose to 33180.14 and was up by 264 points or 0.80%. Whereas Nasdaq added 113.86 points or 0.94% to the index. Dow climbed yesterday due to a surge in the energy stocks supported by rising oil prices and easing of Covid 19 restrictions in China that may lead to higher demand for oil. And therefore a shortfall in Crude oil when Europe has already banned 80% of Russian oil imports.  

The ECB is due to meet on Thursday this week. And the market is expecting either a small hike announcement in this meeting or a proposal for rapid rate rises moving forward. On the other hand, the US Federal Reserve is also expected to raise its fund rate by 50 basis points in its next week’s FOMC meeting and perhaps again in July to cool soaring inflation. The CPI index climbed to 8.3% in April 2022 and the report on May CPI data is due this week Friday.

Chart Analysis

The above S&P 500 chart shows that the index has recovered from the past week's losses. And it now sitting just under the Major Pivot point at 4170 and holding just in a narrow range above support at 4075. At this stage, there is no signal of Divergence between the Stochastic Oscillator and the market. As the index is somewhat consolidating at the current levels. However, as we are moving towards the FOMC meeting update on Friday we could see some big moves to end this week.  

Trade Insights

The chart shows Viable long positions above the Major Pivot point at 4170 with the first target of the Key Resistance Level at 4170. And after the resistance is breached then further long positions Resistance Zone at 4500 to 4530.

Alternatively, Short positions below the Major Pivot point at 4170 with the target to head towards the key support level at 3980.

The week ahead – ECB meeting, FOMC meeting, and US CPI report this week for the month of May. One of the interesting data to look at this week is that the S&P 500 valuations have compressed after the selloff this year. And it seems the stocks have become more reasonable now. The forward 12-month P/E ratio has dropped from 22x at the beginning of the year to 17x now. Which is more in line with the past 10 years' average.

See Chart of the week: