Oil Stocks Dominate the S&P 500 Index As EU Deal Lifts Sentiment

The S&P 500 has opened 0.76% higher after EU leaders ended four days of intense negotiations with a coronavirus recovery package worth $2.1trillion on Tuesday. European stocks surged after the news broke, and the optimism it has generated has spread to the US markets. 

On a day that has seen risk-on sentiment, crude oil prices on the WTI and Brent have also risen more than 3.5%, and this is sending energy stocks on the S&P 500 higher. Among the top gainers on the S&P 500 today, are stocks such as that of Occidental Petroleum Corp, which currently leads the gainers’ chart with a gain of 9.62%. Devon Energy Corp, which is up by 8.67%. Diamondback Energy, Haliburton Co, Marathon Oil Corp and Concho Resources are all trading higher.

The S&P 500 is also getting a lift from positive sentiment around a possible coronavirus vaccine. This is after the UK government placed an advance order for millions of doses of Oxford’s promising coronavirus vaccine candidate. The slew of positive data has helped the S&P 500 to open with an upside gap to 3277, where it now tests a critical resistance on the daily chart. 

Technical Outlook for S&P 500

The 3228.4 price level has served as a crucial resistance which has been tested several times in the last two months and has held firm so far. Today’s upside gap now presents a formidable challenge to this resistance, following yesterday’s close above that level. A definitive break of 3228.4 will require two successive daily candles closing above that level. One half of this time filter was fulfilled yesterday, and if today’s candle can close above this level, the time filter for a breakout is fulfilled. 

This scenario then allows the S&P 500 free reign to attempt a push towards the 3335.5 resistance (24 January high and 21 January low), with the 3400 price level acting as the next psychological resistance target. 

On the flip side, if for some reason the time filter confirmation is not established, we could have a pullback towards 3137.0, which has served as strong support for price action in the last two trading weeks. Below this level, further support areas lie at 3070.8 and 3028.3 (ceiling of support wall), with 2844.3 only becoming relevant if that support wall breaks down.

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S&P 500 Daily Chart

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