The higher opening in crude oil Wednesday was negated by a much weaker than expected Retail Sales report as stocks were hammered once again. The weak sales seem to be in conflict with other data on the consumer, which suggests they are more optimistic than they have been in many years.
We get new inflation data today and tomorrow, but I will be even more interested in the mid-month Consumer Sentiment report from the University of Michigan. If it comes in significantly higher than the consensus estimate of 94, it will have more questioning the retail sales data.
The market was also hurt by the weak earnings from JP Morgan Chase (JPM), which closed down 3.45% on the day. The weakness in the financial sector was consistent with the negative technical outlook and Bank of America (BAC) reported weak earnings this morning. The stock was down 2.5% Wednesday and has lost another 2.5% in pre-opening trading Thursday.
The major averages tested their quarterly pivot support Wednesday but did close above the day?s lows. A weekly close below their quarterly pivot levels (Pivotal 1st Quarter Price Levels) would further weaken the technical outlook.
Many are wondering whether Wednesday?s $2.45 rally in March crude oil is the start of a stronger rally that could help stabilize the stock market. Quite a few others agree with last week?s Barron?s article, where an analyst lowered his crude oil target to $20. A technical and sentiment outlook for crude oil as well as two key energy stocks may help to prepare you for what is going to happen next.