Once again, crude oil takes it on the chin as the downside slide continues to pick up steam. A month ago, the uptrend-line that marked the rebound from February’s swoon was violated; and now, West Texas Intermediate (WTI) is approaching a critical support point.
After crude began to tumble on Monday, equities surged to the upside for a split second but that move was short-lived. The good news is that stocks worked back toward the flat line into the closing bell, but the bad news is that crude-equity correlation could be a major drag on stocks.
There is a chance it could be a non-event by Friday, but it’s important $39.00 holds as a very important support point.
Rotation
I wrote about the earnings and guidance disappointments for Utilities and Staples thus far in this earnings season. Now that it’s clear those safe havens are overpriced, I suspect there will be a greater sense of urgency to rotate elsewhere.
Monday, it was the NASDAQ composite, which leaped to a 52-week high paced by some big tech names that continue to rebound in Netflix (NFLX), although most of the credit should go to biotechnology.
IBB
Biotechnology is down 26% since its high last July, but closed on Monday above key resistance; this rally could pick up steam. One name I like a lot is Biogen (BIIB), which I think could move up more than 100 points.
IBB
While the market grapples with free-falling crude and new leadership, don’t forget the jobs report looms large on Friday.