D&D Note (4.20.2020) ~ WTI Crude Oil Falls to Negative On Expiration of May Contract For First Time Ever ~
The May 20 contract of NYMEX WTI Crude settled at negative -$37.63 a barrel down over negative -200%. This was the first time in history WTI fell negative. The June 20 contract is trading at #21 a barrel and that contract starts this Wednesday. Initially investors thought WTI Oil would just fall to zero but then the CME today said they would allow it to trade below zero and then the bottom fell out.
The negative price action reflects the reality we are in whereas the stock market is currently not trading at 19 times earnings. There is no demand for oil, there is nowhere left to store oil, and oil tankers are just floating around the oceans with nowhere to go.
The S&P 500 was trading right at the 50 week moving average before WTI fell negative and then equities fell through that support line making it now a line of resistance. That portends stocks will fall over the next few weeks. Indexes all closed at session lows.
DOW down -2.44% (falling 592 points)
S&P 500 down -1.79% (at 2823.16)
NASDAQ down -1.03%
VIX (the fear gauge) jumped over 12% to 43.09.
When Oil fell negative D&D immediately took some gains in the following positions:
There will certainly be better price points in the near term future for the majority of stocks.
~ Dave James / Principal Trader and Market Strategist