Future economic expectations are strong drivers of both Oil prices and the Stock Market. A slowing economy portends lower demand for Oil and reduced earnings for stocks. While Oil doesn’t always lead the stock market, they are tightly correlated and if Oil breaks below multi-month support it will be a warning that stocks may do the same. The recent two day fall in Oil from $57 to 53 has added downside pressure to stocks this week and a drop below $50 will likely accelerate declines in equities back to their 8% correction lows under 2800 basis the SP 500 Index. The next target zone for Oil in 2019 under the $49 to $50 area is a major support zone between $40 and $46 a barrel. If the lower 40’s in Oil are reached, stocks will be down well over 10%.  

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The stock market trading range we have expected remains in force, with each test of support and resistance increasing the odds of a breakout. Technically we have a potential short term Bullish pattern if prices merely retest the SP 2940’s for a fourth time. Such a test would support a breakout back toward records highs near 3030. In the Bear camp, we view 2860’s SP target as an inflection support area below which a test of the trading range lows and likely break much lower could occur in September.

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