The Organization of the Petroleum Exporting Countries, including Russia (OPEC+), shocked the markets overnight following the announcement that the organization would cut the oil supply by about 1.16 million per barrel. The market’s reaction was to push the US Dollar and bond yields higher, negatively weighing on the equity markets. The S&P500 Futures (CME: ES) opened the Monday trading session lower as investors
The stunning announcement looked to halt the bullish rally by the futures following the recent US macroeconomic indicators. Friday’s US Personal Consumption Expenditure data boosted the equity markets following the figures that suggested that even though US inflation is still way above the 2% target but the economy shows signs of cooling of cost pressure in the short term.
Technical
The 4H chart shows that the index futures recently broke out of the ascending channel and are currently trading around a daily pivot point. Investor reaction around the pivot point could determine the direction of the price action in the face of contrasting macroeconomic reports looking to boost both the bears’ and bulls’ sentiments in the short term.
Suppose the price action rejects and substantially moves above the pivot level, then the bulls could be confident in testing the resistance level at the 15th of February 2023 high of 4168.25. The breakthrough above the initial resistance level, supported by significant volume, could push the price action towards the 7th of February 2023 resistance level at 4188.25.
Suppose the supply cut continues to drive investor sentiment in the short term and push the price action lower. Thus, a breakthrough of the support level around the 23.60% Fibonacci level at 4074.00, a level of significance for the bears, could confirm the presence of a bearish momentum. Increased selling pressure could push the price action towards the 4043.25 support level in the medium term.
Summary
Investors could believe that the rally in oil prices following the stunning OPEC+ is going to be short-lived and the index futures could continue their rally. Thus, could find an opportunity if the price action breaks through the resistance level at 4168.25.
Sources: TradingView, Reuters.
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