By Barbara Kollmeyer, MarketWatch
Pop goes the rebound. While you were sleeping, that overnight bounce all but vanished and left us almost exactly where we were this time on Monday.
That is, with stock futures deep in the red. Not helping out has been a big push south for oil prices after the IEA joined OPEC in flipping its picture of dwindling oil supply. And well, where oil goes, stocks often follow.
Those impatiently looking for real capitulation on oil, though, may have to hold off until the end of the month. That’s when OPEC and Russia may fail to agree on a supply freeze, IG’s Chris Beauchamp tells clients in a note. We’ve got more on oil below, in our chart of the day.
Back to stocks. Even after Monday’s storming rally, we’re not back up to pre-Friday levels, notes Beauchamp. Obviously the action out there this morning isn’t doing anything to help, though the day is young.
“It’s clear that Friday’s tantrum was inspired by, but not wholly due to the Fed, with the bigger picture indicating that September will see a hefty dose of volatility before the traditionally strong October-December period kicks in,” he says.
Note that Goldman ratcheted down its Fed rate-hike expectations this morning, post-Brainard.
Dana Lyons of J. Lyons Fund Management did a tech dive on Friday’s action and concluded that “widespread, frothy investor sentiment likely will need to be unwound much further before a durable bounce.”
All this calls for patience, and many investors have about as much as my 8-year-old in that department. But who can blame them, when the market has been largely doing their bidding for so long? That brings us to our call of the day and a technical pattern that says we’re working toward a pullback for the S&P 500. But ever so slowly.
Key market gauges
S&P 500 , Dow industrials and Nasdaq-100 futures are back in the red. In Asia /zigman2/quotes/211618636/realtime XX:ADOW -2.52% , stocks rebounded from Monday’s takedown, but had given much of that up by the close.. In Europe /zigman2/quotes/210599654/delayed XX:SXXP -3.54% , French and German stocks are around 1.7% lower.
The IEA dealt a blow to oil bulls this morning, slashing its global-demand predictions by 100,000 barrels a day for this year and by 200,000 for in 2017 — thanks to “wobbling” appetite in China and India for the commodity.
“Even with a modest weather-related uptick forecast for the end of the year, oil demand growth in 2016 will struggle to get above 1.3 [million barrels a day]. Refiners are clearly losing their appetite for more crude oil,” said the influential Paris-based agency.
The IEA’s chart within that report, showing where they see that all-important balance between demand and supply up to the end of next year, says it all:
There’s also a bit of contango chatter out there. Contango means that near-month futures are cheaper than those expiring further into the future.
If a particular technical pattern plays out, the S&P 500 could face a 20% to 25% correction by spring, says NorthmanTrader’s Sven Henrich to MarketWatch.
For the non-techies, a rising wedge pattern is taken as a bearish signal for an index. As the chart shows, the pattern begins wide at the bottom and narrows at the top as prices move higher and the trading range gets tighter.
Henrich says this rising wedge is developing alongside “extremely steep support lines,” with the market still completely uncorrected.