The S&P500 SPDR ETF is shown below printing a series of higher lows on the 5min chart, at the Tuesday close. Blocks below and blocks overhead, where we anticipated correctly that we could see a gap on the ADP report this AM.
Oil prices are climbing for a second day in early trading, touching a one month high as a decline in U.S. crude stocks abated. Crude oil traders are speculating that an OPEC-brokered output cut is near, which in turn will reduce the global supply inventories. A production outage in the North Sea also lent support.
If crude continues higher, anticipate a lift in U.S. equity prices.
U.S. crude (WTIC) inventories fell by a larger-than-forecast 1.8 million barrels last week, according to the API report on Tuesday.
Crude traders will focus the government’s inventory data, due out at 10.30 ET.
Global benchmark Brent crude rose 70 cents to $54.84 a barrel, while U.S. crude was up 61 cents at $51.64.
High Yield Corporate (HYG) and (JNK) daily charts show a bull flag above the moving averages.
If these conditions persist and HYG/JNK moves higher, this will buoy crude oil, which in turn will drag the equity markets along with them. HYG and crude would need to suddenly reverse to lower levels to start thinking bearish equities.
Bonds were lower on Tuesday, as TLT saw profit taking. Yields fell in the previous sessions, as the chart below depicts. The U.S. 10-Year Treasury yield paused at 2.35% and continues to shows signs of strengthening this morning. If that continues, watch for strength in banks today.
With ADP reporting a beat in the job numbers reported this morning, we are still looking for a gap over 235.74, chart at the top of this post. We are currently trading 235.94.
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