Panic Rocks Equities
S&P – e-mini S&P futures are down almost sixty points this morning, following sharp declines in European and Asian markets over the past two trading sessions. The fire sale began yesterday with the thinking that the U.S. economy now has a 50-50 chance of slipping into recession. Investors became especially pessimistic after listening to Fed Chairman Ben Bernanke’s testimony before a Congressional panel last week, urging the President and Congress to act swiftly to aid consumer spending and the housing market. The market was less than satisfied with the stimulus package unveiled on Friday, viewing it as too little, too late. The very idea that the economy would need this sort of kick-start has really irked traders overseas. This week figures to be extremely volatile due to the panic kicking off the week and the high volume of earnings releases. This will be a very light week of economic reports, which may give traders a bit of a reprieve. The March e-mini chart is a disaster after gapping sharply lower. Momentum has fallen to an overwhelmingly bearish -208 in the early going. The RSI is now giving extremely oversold readings, which may slow the sell-off if it can attract bargain hunters. Support now comes in at 1250 and 1225, while resistance can be found at the top of the gap of 1319.
Crude Oil – Oil futures are sharply lower on panic selling in the equity markets. The sharp declines seen in Europe and Asia are extremely troubling to energy bulls, as they signal a greater chance of a global slowdown. The increasing demand in developing nations has contributed greatly to the strength in energy prices. A curbing of this demand, along with easing in other commodity prices, could lead to much slower inflation that previously forecast, making Crude Oil much less attractive as an inflation hedge. The U.S. Dollar is still spiraling out of control, which may give some near-term price support to the market, or at least act as a buffer to sell-offs. March futures are well off of overnight lows at the moment and it appears that declines below 86.00 have attracted some buying interest. Barring a sharp turnaround, today’s sell-off could signal a downside breakout to the consolidation pattern formed over the past three trading sessions. Momentum has moved lower at a slower pace than prices, suggesting the possibility of some short-term strength. Support comes in at 85.40 and 82.60, while resistance can be found at 89.00 and 91.60.
Gold – Gold futures are sharply lower this morning, but are well off of session lows that tested the $850 mark. The inflation picture seems a bit tamer at the moment due to the possible slowdown globally, making precious metals and other commodities somewhat less attractive to speculators. The recent wave of profit-taking has contributed to the initial price weakness seen in the session. Even with inflation pressures easing, Gold may hold its own in the near term due to the lack of opportunity in other investments. February Gold attracted strong buying interest after the market retreated to the 850 mark. The February contract is trading below the 18-day moving average at the moment and a close below the average could signal that a near-term high may be in place. A recovery above the average would likely form a bullish hammer and may violate a downside breakout on the chart. Momentum is outpacing the RSI, suggesting a slightly bullish technical bias in the near-term. Support can be found at 850 and 835, while resistance may be found at 870 and 890.
Rob Kurzatkowski, Commodity Analyst
