It's looking rough out there and there is not much of any room for shelter. There is a rout in bonds, stocks, and precious metals all put together as surging oil prices and the Middle East conflict drags on. This is when you have to start thinking of margin calls as pointed out last week here.
US futures are down in the dumps again today, extending losses as we get into European trading. S&P 500 futures are now down 1.0% with Nasdaq futures down 1.3%. That follows from the Friday dump, which was a significant one in reaffirming the technical breakdown for tech shares especially last week.
Both the S&P 500 and Nasdaq have firmly broken below their respective 200-day moving averages (blue line), and also the technical floor set out by their October and November lows respectively. That's a massive blow on the charts to dip buyers, signaling a material shift in momentum.
This would mark the first time since early May last year that both the S&P 500 and Nasdaq traded below both of its key daily moving averages. And before that, you have to go all the way back to October 2023 for price action to see a brief dip below those two key levels. And if you want to consider a more significant timeline in which stocks were struggling below the key levels, it was all the way back during 2022. That is to say before the AI rally came about.
Since then, it's been a generational run for equities in the past three years. And the start of this year wasn't all too bad either. But as we see the AI rally run into many challenging factors driving exhaustion, the US-Iran conflict looks to be the trigger siren to end the party. That as higher oil prices risk becoming entrenched and translating into higher inflation. In turn, that has materially shifted major central bank expectations with rate hikes now being on the table.
With the way the charts are developing as seen above, things look like they may turn much uglier before they get any better for Wall Street. And if $100 oil prices are already spooking investors, wait until we see real fear creep in when the war isn't over in one to two months and oil prices risk doubling from here.
