S&P Set To Test Bear Line In The Sand As Oil Teeters - Morning Market Squeeze

Key Tactical Takeaways:

> The stage is set for a critical test of SPX 3431.70, which is the line in the sand that keeps the September correction in check heading into what is typically a bearish 2nd half of the month.

> Now that the VIX has closed back below both its NT trailing stop and the 09/03 breakout point (both in the area of 27.10 to 26.60), < 1-sigma daily ranges are back in vogue until we see a VIX close back above 25.50.

> Crude oil prices are at risk of a ...

> We'll be looking to add bearish ... ETF positions in the coming 1-3 days. In addition, we look to go long ... in the event of a pullback.

Some Quick Thoughts:

As we wait to see whether the current correction in US equities is poised to morph a bit lower as the current pattern is still warning of, today we shift our focus to the oil pits. On Monday, OPEC released its monthly MOMR report, which detailed the organization's lower forecast for global oil demand. Not only did the report highlight an expected drop from 90.63M barrels per day in July to 90.2M barrels (the organization's second consecutive lower monthly estimate), it also lowered its estimates for all of 2021. In short, the group of nation members with the most to gain from higher oil prices paints a very gloomy outlook for oil prices. Adding to this gloom is the fact that British Petroleum, another organization highly dependent on higher oil prices, released a report that also painted a picture of significantly suppressed oil demand based on the impact of the Covid-19 virus.

Quite often, when such bearish developments hit the tape at such depressed price levels it marks some form of a tradable low. While oil prices are higher this morning, it’s undeniable that the pattern of the past 4 days resembles a ... If this pattern is confirmed with a close below ..., it would set the stage for a ...

Back in the old days, when free market forces allowed for oil's economic sensitivity to act as an important indicator for equities, such a bearish setup in oil prices would be cause to ... In this new world of artificially supported equity participant psychology and work from home tech-driven equity index dependence, however, we suspect that such a route in oil prices, should it occur, will ...

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