S&P 500 Index: Futures Eye 200-Day MA Today as Oil Surge Hits Risk Appetite

U.S. Stock Futures Slide as Oil Surge Rattles Wall Street

The major U.S. stock index futures are trading lower shortly before the cash market opening on Monday. The catalyst behind the weakness is a surge in U.S. oil prices amid the U.S.-Iran war in the Middle East. Sellers are being motivated by concerns that higher energy prices could drive inflation higher and dramatically slow the economy.

Sunday Night Selloff Was Fierce Before the Rebound

The selling was fierce when the futures market opened on Sunday night with the Dow dropping nearly 800 points before all three majors rebounded. At 10:15 GMT, March E-mini Dow futures are trading 47024.00, down 493.00 or -1.04%. March E-mini S&P 500 Index futures are at 6678.00, down 65.75 or -0.97% and March E-mini Nasdaq-100 Index futures are trading 24405.00, down 265.25 or -1.08%.

Oil’s Wild Ride Is Setting the Tone

April WTI Crude Oil futures opened at $98.00 before surging to $119.48. Sellers came in after the buying thinned, driving prices back to $101.41, where they currently sit. The price action suggests the market may be trying to fill the overnight gap at $96.25 to $92.61. Investors are watching the price action closely because many on Wall Street feel that a sustained move over the psychological $100 level could cripple the economy.

Uncertainty Is Forcing Investors to Sell

Uncertainty is also a key driver of the volatile price action. Investors are being forced to deal with various economic outcomes especially the end of the war and how long it will take the oil market to recover. The longer it takes to return to normal, the more damage that could be inflicted on the economy in the form of higher inflation, slower growth and higher interest rates for longer by the Federal Reserve. Much of the gains in the stock market are tied to lower rate expectations.

Not knowing the outcome of the major events is also making it difficult for investors to hedge away the risk, making selling overweighted stock positions their only choice.

200-Day Moving Average Is the Line in the Sand

Technically, March E-mini S&P 500 Index futures are in a weak position, but attempting a comeback. Earlier in the session, the index plunged through the 200-day moving average at 6682.00 before dropping to 6584.50, just above the November 21 main bottom at 6583.00.

Aggressive buyers stepped in on the weakness, spooking the short-sellers and driving prices back to the 200-day MA. Overcoming this indicator could fuel a strong intraday short-covering rally, with 6784.25 to 6831.25 the main target zone.

The tone of the market today in the futures market is likely to be determined by trader reaction to the 200-day moving average at 6682.00.

Cash Market Support Levels to Watch

The S&P 500 Index (SPX) or the cash market has 200-day moving average support at 6582.53. This falls inside a major support zone at 6566.50 to 6483.00.

More Information in our Economic Calendar.