E-mini S&P Reaction to 4344.00 Pivot Sets the Tone

March E-mini S&P 500 Index futures are edging lower shortly after the cash market opening on Tuesday as oil prices surged to a seven-year high and investors continue to monitor the fighting between Russia and Ukraine.

The continued aggression from Russia pushed energy prices higher, raising fears of a spike in inflation, which tends to weigh on stock prices. West Texas Intermediate (WTI) crude futures jumped 5% on Tuesday morning, breaking above $102 per barrel and hitting its highest level in seven years.

At 15:38 GMT, March E-mini S&P 500 Index futures are trading 4346.25, down 21.75 or -0.50%. The S&P 500 Trust ETF (SPY) is at $432.82, down $3.81 or -0.87%.

Financial stocks were some of the biggest losers on Tuesday, with Bank of America down 1.9%, Citigroup off 1.8% and Charles Schwab lower by 3%. The lower bond yields could potentially take a bite out of bank profits, while the conflict in Eastern Europe and sanctions on Russia have some traders worried about disruption in credit markets.

The VanEck Russia ETF, which sank 30% on Monday even as markets in that country were closed, was down another 7% on Tuesday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 4484.50 will change the main trend to up. A move through 4101.75 will reaffirm the downtrend.

The minor range is 4586.00 to 4101.75. The index is currently straddling its pivot at 4344.00.

On the upside, the resistance is a retracement zone at 4455.00 to 4538.50.

On the downside, the key support is 4263.25 to 4134.75.

Daily Swing Chart Technical Forecast

The direction of the March E-mini S&P 500 Index on Tuesday is likely to be determined by trader reaction to 4344.00.

Bearish Scenario

A sustained move under 4343.75 will indicate the presence of sellers. The first downside target is the main 50% level at 4263.25. This is a potential trigger point for an acceleration to the downside with the next major target area 4134.75 to 4101.75.

Conditions could deteriorate fast under 4101.75.

Bullish Scenario

A sustained move over 4344.00 will signal the presence of buyers. Taking out the intraday high at 4399.00 will indicate the buying is getting stronger. This could trigger an acceleration into the short-term resistance area at 4455.00 to 4538.50.

Side Notes

The Russia/Ukraine crisis is likely to keep investors on heightened alert, but its impact on U.S. corporate earnings should be small. However, higher oil prices and higher inflation are likely to take a huge bite out of those profits. Investors aren’t sure yet what that bite will be so they are approaching the long side with caution.

The dovish reassessment of the Fed, or the lowering of the odds of a 50-basis point rate hike by the Fed are likely the catalyst propping up prices.