Oil prices stay elevated as Iran supply fears overshadow Russia measures
The S&P 500 finished the day lower by 53 bps, which was better than the intraday low when it was down by more than 1%. More importantly, the index closed below the wedge trendline. Perhaps this means nothing, and the index gaps higher today and reclaims the trend. Or perhaps this marks the beginning of a sharper decline.
Based on the pattern, it appears that the S&P 500 could initially return to 6,550; what happens thereafter remains to be seen. I will note that the S&P 500 has had numerous opportunities to break out and move higher, but has been unable to do so. The index is essentially unchanged since the end of October, whether one likes it or not.
It is really the same for the NASDAQ, and if the index has finally broken the diamond pattern, then we should be on a path that undercuts the November low. In the end, this is an index that is still below its October highs, not the definition of a “melt-up”, that’s for sure.
As noted previously, the setup in Wednesday’s market looks very similar to that seen at the start of 2022 and 2025. At least to me it does.
Equity financing costs told the same story on Wednesday as they did in 2022 and 2025.
Unfortunately, when we look at the CDS of Oracle (NYSE:ORCL) and Meta (NASDAQ:META), they appear to be spreads that are likely to widen after a few weeks of consolidation. If credit spreads on these stocks begin to rise due to AI Capex, it won’t be a positive development for the overall market.