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Global stock markets tumbled on Wednesday and the S&P 500 Index fell the most in seven weeks as energy shares plunged once again and crude oil futures dropped below $62 a barrel.
US markets were a sea of red with only a handful of companies finishing the day in positive territory. The S&P 500 dropped -1.63% on the session and the energy sector once again caused most of the damage after OPEC cut its 2015 production forecast by around 300,000 barrels. The organisation now predicts production of 28.9 million barrels in 2015, the lowest level in 12 years.
As a result, there were sustained losses for energy stocks. Chevron Corp lost 2.01%, ConocoPhillips fell 2.19%, and Exxon sank 2.97%.
There were also some some sharp losses in the financial sector after JP Morgan said fourth-quarter trading revenue was not looking good compared to previous years. JP Morgan shares finished lower by 2.8%.
Technicals & Outlook
Despite the sharp drop, price action in the S&P 500 was not unattractive for technical traders yesterday. The index opened just above its pivot and moved steadily lower throughout the day, closing just above the second support. Pivot traders with a bearish bias would had a good opportunity to capture gains on the down side yesterday with very little resistance. The index declined to the top of wave (i) which means the current decline cannot be a fourth wave (in an impulse wave the fourth wave does not overlap the first).
This suggests that the trend has turned down. We note mixed signals from a broad range of indicators and we see a bullish trend developing over the next few days as the index is oversold. The RSI is below 30. In the short term however we are sellers around the 2060 to 2070 level for a move down to 1990.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
