SPDR S&P 500 ETF Trust SPY Stock News and Forecast: Another leg lower is due

• Oil prices surge as Russian oil ban discussed by the US.
• European stock indices sharply lower on Monday as oil breaks $125.
• SPY is set for more losses as sentiment turns increasingly bearish.

Another oil price surge on Monday sent European markets into a fresh tailspin and set US equity markets looking at a weaker open. The oil spike kicked off on Sunday as the US mulled over a ban on Russian oil. So far Germany has resisted a further round of sanctions on Russia. Germany is heavily dependent on Russian gas, so it has a tricky position to balance. At the time of writing, European markets are all sharply lower.

The FTSE is the best performer, down only 0.5%, but the German Dax is -2.5% and the Eurostoxx 50 is -1.1%. However, there has been something of a slight rebound in the last hour with most European indices bouncing about 1%. News of Germany rejecting further sanctions has likely helped equity markets recover as the oil price tacks back toward $120. Oil hit a high of $127 earlier. The dollar remains strong at 1.0880 versus the struggling euro, while the Russian rouble continues to fall, hitting 140 now versus the dollar. 

SPY Stock News

The big highlight this week from a data perspective will be the US CPI report on Thursday. Inflation concerns are spooking equity markets, and this reading will not take into account the latest developments in the oil price. However, it is the last reading before the Fed's March meeting. Money and bond markets continue to reduce bets on central banks hiking rates as bond investors see increased risks of stagnant economic growth in 2023. Certainly euro currency traders have penciled in a likely EU recession as the currency slumps versus the dollar and goes below parity versus the Swiss franc. 

SPY Stock Forecast

Last week's repeated failure to break above $438 looks likely to result in more downside pressure this week. The $428 to $438 range remains key, and with a break of $428 will come a likely sharp move to $420. The prior spike low at $410.64 then becomes key as a break will see SPY go below $400 in our view. We remain with a declining Relative Strength Index (RSI), but the Moving Average Convergence Divergence (MACD) crossing over last week does cloud the picture somewhat. Today's opening sell-off will most likely see this too cross back into bearish territory. 

SPY 1-day chart