Equity rally remains captive to WTI Crude oil and Interest rates

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Near-term SPX trends remain bearish despite the 1% bounce on Monday, and both trends and momentum remain negatively sloped while market breadth is in dire need of immediate recovery.   For now, the risk-on trade remains captive to WTI Crude oil and progress in reopening the Hormuz Strait.  Monday’s selloff in WTI Crude oil, along with the US Dollar and US Treasury yields, proved to be a bullish catalyst for Equities, and Cryptocurrencies have also achieved minor short-term breakouts. In the days ahead, the Fed meeting, along with Quarterly options expiration, are both thought to be possible market-moving events, and my thinking is that bounces remain too early to trust as being legitimate. Most investors should continue to favor a heavily diversified stance and overweight defensive sectors like Utilities, Telecom, and Pharmaceutical stocks until Technology can show more evidence of stabilization, in my view. Increasingly, I’m expecting that November 2025 lows could be tested, given no evidence of WTI Crude oil peaking, and I’m expecting Monday’s selloff doesn’t prove long-lasting before another attempt to push higher, potentially next week.

It’s all about Oil right now, and until some evidence of stabilization in the Iran war, which results in WTI Crude starting to turn meaningfully lower, it’s difficult to consider a bounce like what happened on Monday to have much importance.

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