You never know what's going to catch your eye on a Monday. The economic calendar and corporate earnings have attracted the most attention due to the focus on inflation and a potential recession. But OPEC decided to throw a wrench into the mix with its decision to spring a production cut on an unsuspecting market.
Traders walked in on Monday to find crude oil futures bouncing around $80 to $81 per barrel and the United States Oil Fund (USO) trading around $70, exactly where it stalled out in mid-February and early March. If you look at a weekly chart of the USO, you'll see that Monday's advance sent the ETF back toward the underside of its volume-weighted average price (VWAP) anchored to the June 2022 swing high.
Oil bulls have struggled to push the USO above the low $70s for the past four months, so even after Monday's advance the bulls may need some time and consolidation before trying to make their next move.
If you fancy the oil companies over the commodity, watch the SPDR Energy Select Sector ETF (XLE) . The XLE spent an enormous amount of time over the past five months churning between the mid $80s and low $90s. While I'm not looking to chase the XLE on strength, a dip toward the rising 5-day exponential moving average might be worth a trade.
Monday's trading, especially in the indexes, was quiet outside of the oil market. The Invesco QQQ Trust (QQQ) remained inside Friday's range, while the SPDR S&P 500 ETF (SPY) gained around 0.4% and the iShares Russell 2000 ETF (IWM) closed about flat.
While I've never been a fan of a quiet stock market, Monday's consolidation was precisely what the QQQ bulls needed. The fact that the QQQ ended the day at the highs of the session is a relatively strong indication that dip buyers are as active as ever.
Another thing worth noting is that despite selling off sharply in the morning, the IWM bounced almost immediately upon testing its rising 5-day exponential moving average (EMA). Again, a good indication that dip buyers remain engaged in this market. Even if the only thing supporting the bull case is the price action, that appears sufficient for dip buyers, so let's not argue with them.
