ENERGY SHARES LEAD MARKET LOWER AS CRUDE OIL DROPS TO TWO-WEEK LOW -- TWO ENERGY ETFS FALL TO NEW 2017 LOW -- DOW INDUSTRIALS CLOSE AT TWO-MONTH LOW -- S&P 500 REMAINS ON THE DEFENSIVE -- ON BALANCE VOLUME LOOKS WEAK
CLIMB IN GASOLINE SUPPLIES HURTS CRUDE... A surprising jump in gasoline supplies caused heavy selling in the price of crude oil and gasoline. Chart 1 shows the United States Oil Fund (USO) falling nearly 4% today to the lowest level in two weeks. The USO also fell back below its 50- and 200-day moving averages. And it do on rising volume. Gasoline fell 3%. That helped make energy the day's weakest sector. And that in turn is weighing on the rest of the stock market.
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Chart 1
ENERGY ETFS FALL TO NEW 2017 LOWS... Energy stocks were the market's weakest sector during the first quarter. A rebound over the past few weeks hinted at a stronger performance as crude prices rebounded. Today's action has negated that recent rebound. Chart 2 shows the Energy Sector SPDR (XLE) falling to the lowest level since early November. Oil service stocks, which are more sensitive to the direction of crude, has lost even more ground. Chart 3 shows the VanEck Vectors Oil Services ETF (OIH) losing -2.6% today while falling to a five-month low. [Pipelines, which are less dependent on crude oil direction, held up better but still lost ground]. The downturn in energy removes at least one potential support for the stock market which remains on the defensive.
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Chart 2
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Chart 3
DOW CLOSES AT TWO MONTH LOW -- S&P 500 UNDER PRESSURE... The Dow was the day's worst performing stock index. Chart 4 shows the Dow Jones Industrial Average SPDR (DIA) closing at the lowest level since mid-February. Volume bars show heavier selling on down days, which is a negative sign. Monday's low volume bounce met resistance at its 50-day average. Chart 5 shows the S&P 500 SPDR (SPY) ending the day lower after an early bounce met resistance at its 50-day line. The SPY has held up better than the DIA. But that may not last. The On Balance Volume (black line) in Chart 5 has fallen to the lowest level in more than two months and looks a lot weaker than the price bars. The falling OBV line reflects the fact that downside volume over the last month has been heavier than upside volume. That usually suggests that prices will also fall further.
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Chart 4
