The shockwaves from yesterday’s explosion in the oil markets continued to damage oil prices and shrapnel from the blast caused damage to equities today as U.S. markets closed in the red after a nearly 3-week rebound.
West Texas Intermediate crude closed down 9.49% at $9.06, and June 2020 futures dropped from $22.58 to $13.12. What is clear is that investors remain fearful about the future of the entire industry as the coronavirus pandemic continues to dampen demand for oil.
Is it over for stocks?
Before the start of this week the S&P 500 and Dow had recovered approximately 30% of the losses from the Feb. 20 correction which quickly brought markets to historic lows. As shown on the 3-day chart below, the S&P 500 had rallied within a hair of the 61.8% Fibonacci retracement level, a point which many analysts forecast would be challenging to overcome.
Rejection at this level is likely to crush the narrative of a V-shaped recovery like the one witnessed in late December 2018.
SPX (S&P 500) 3-day chart. Source: TradingView
Traders who swear by the TD Sequential indicator will have also noticed that last Friday (April. 17) the market flashed a sell signal when a 9 appeared over the daily candle.
SPX (S&P 500) daily chart with 9 on TD Sequential. Source: TradingView
The Dow is in a similar position having met resistance at the 50% Fibonacci retracement which is slightly below the VPVR point of control at 246.22, a pivot point for the Dow. At today’s close both indexes were down 5.07% and 5.30% respectively.
DOW (DIA) 3-day chart. Source: TradingView
For the past few weeks analysts from traditional markets have debated whether or not a strong recovery was in the making. Recently Goldman Sachs forecast that the current recession would be nearly 4 times worse than the 2008 housing crisis.
Meanwhile, pro business proponents from the Trump Administration have said that the current economic downturn is unsubstantiated as the markets will snap back to profitability…