The S&P 500 finished the day modestly lower, closing beneath its 200-day moving average for the first time in several months. Whether or not this marks a meaningful shift remains to be seen—I find that moving averages only matter until they don’t. But at least for yesterday, it appeared to act as a resistance point for the index.
today is options expiration, and there will undoubtedly be plenty of strange movements overnight and ahead of the open. But just as the FOMC meeting failed to produce the typical post-meeting volatility crush, it’s hard to say what lies ahead for quadruple witching day. Options positioning suggests a move to higher levels is possible, though the flows I’m tracking don’t appear particularly strong. As a result, oil will likely remain the dominant force in the market.
For now, WTI crude continues to hold what appears to be an increasingly important area of support. That level aligns well with prior highs and the short-term trend. As long as oil holds that support and the trend continues higher, it will likely maintain an upward bias.
Additionally, WTI is currently trading at a historically wide discount to Brent—a spread that has only been this wide during the European debt crisis. That’s something to keep an eye on if you’re expecting WTI to decline. Either WTI needs to rise, or Brent needs to fall.