The Daily Breakdown digs into the recent volatility in the market and looks at the charts for oil as prices continue to rise.
Wednesday’s TLDR
It’s been a tricky market lately
Earnings kick off today
Oil starts off 2025 with a bang
What’s happening?
It remains a choppy environment and the Nasdaq 100 highlights exactly that.
After an encouraging economic report yesterday — the PPI results, which came in lighter than expected and suggested that perhaps today’s CPI report may not be as strong as feared — the Nasdaq 100 opened higher by 0.6%. It was quickly up 0.9%, then down 0.8% at one point in the day before finishing near flat.
(Investors looking at the Nasdaq 100 can also use the QQQ ETF).
The S&P 500 was choppy too, which can be frustrating for active investors.
Here’s the truth: It’s a difficult environment for traders right now because the seemingly erratic and large up-and-down moves puts extra emphasis on discipline and patience. While these two characteristics are championed in all environments, traders can often “get away with” a more relaxed approach during strong bull trends. However, it’s often a rude awakening when volatility spikes.
That said, this type of price action is generally healthy for long-term investors. It gives the market a chance to work off some overbought steam and gives investors a chance to accumulate their positions at lower prices.
Know which bucket your portfolio falls into so you know how to approach these types of environments.
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The setup — USO
We spend a lot of time talking about stocks and crypto, but not so much on commodities. This morning we’re looking at the United States Oil Fund — USO.
Crude oil has started off the year with a bang, climbing more than 10%. USO has enjoyed a big move as well, climbing a similar amount. Now though, it’s running into resistance.
For more than a year, the $82 to $84 area has been stiff resistance for USO. If it can’t push through this area, prices could retreat.
For options traders, puts or bear put spreads could be one way to speculate on further downside. It could also be a way for USO bulls to hedge their long positions. Find out more about options trading with our free Academy courses.
On the flip side, a rally above this resistance area could trigger a larger move to the upside. In that breakout scenario, bullish investors could consider calls or call spreads as one one way to speculate on a larger rally in USO.
What Wall Street is watching
BLK – Shares of BlackRock are moving higher this morning, rallying more than 3% in pre-market trading after the firm delivered a top- and bottom-line earnings beat. Revenue climbed more than 22% year over year as client assets swelled through 2024’s bull market.
XLF – The financials ETF — the XLF — is in focus today as a number of bank stocks kick off earnings. Some of those stocks include JPMorgan, Goldman Sachs, Citigroup and Wells Fargo. More bank stocks follow tomorrow, too.
NVDA – Highlighting some of the pain beneath the surface of what seems like an innocent ~5% correction in the S&P 500, Nvidia has fallen in five straight sessions. Ironically, the stock made new record highs on what ended up being the first day of the current correction. Shares are currently down about 14% from the all-time high.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.
