Recently, the global financial market has experienced violent fluctuations rarely seen in history. Under the dual influence of geopolitical conflicts and the eve of the release of macroeconomic data, commodities represented by crude oil have staged an extreme roller coaster market, while the stock market has repeatedly seen saws near key technical levels. This article will be based on the latest market data to sort out the internal logic of this round of fluctuations, the current structural state of the market, and the possible policy impact of the upcoming U.S. inflation data.

Historic oil market shock: the loss of the hundred-dollar barrier and the logic of options

In the past 48 hours, the crude oil market has completed a rapid switch from "crazy" to "panic". New York oil futures briefly broke through the $120 per barrel mark at the beginning of the week, hitting a high not seen in many years, but immediately encountered epic selling pressure. As of the close of trading on March 10, New York oil futures fell more than 11% to US$87.8 per barrel, the highest single-day decline since March 2022; London Brent oil futures also fell to around US$83.45 per barrel.

The direct trigger of this dramatic reversal stems from subtle changes in geopolitical signals. High-level U.S. officials have signaled that military action against Iran may "come to an end soon" and may reassess relevant oil sanctions, which directly alleviated the market's extreme concerns about disruptions to crude oil transportation channels in the Strait of Hormuz. However, news aside, the price action itself exposed a deeper fragility in the market: a stampede effect in the derivatives market.

In the previous few trading days, as oil prices continued to rise, a large number of speculative call options were established. This kind of position structure that focuses on one side often triggers collective liquidation of long positions after the price hits a key resistance level (such as the ten-year high of $120) because it cannot continue to break through. This kind of technical selling of "more kills more", combined with the trend ending of macro hedge funds, jointly contributed to the extreme decline of more than 10% in a single day, and billions of dollars of chips were liquidated in a fierce two-way game.

It is worth noting that despite the huge shock in short-term spot prices, forward contract price fluctuations are relatively mild. For example, the December contract price is still stable at around US$70 per barrel. This shows that the current market panic is mainly focused on short-term supply expectations for near-month delivery, rather than a fundamental reversal of the global long-term supply and demand pattern. The forecast of the U.S. Energy Information Administration (EIA) also confirms this. It believes that supply disruptions due to the geopolitical situation will keep Brent oil prices above US$95 in the next two months, but as the situation eases at the end of the year, the price center will gradually fall back to the US$70 level.

The "dead cat jump" of the stock market and the tug of war at the technical barrier

The sharp rise and fall of crude oil directly impacted the overall market sentiment, but the reaction of the stock market showed a more complex structure. The major U.S. stock indexes experienced a dramatic intraday reversal on Tuesday (March 10). The Dow Jones Industrial Average soared nearly 480 points at one point, but gave up all of its gains in late trading and ended slightly lower, showing a serious lack of momentum to sustain high levels.

As of the close of the day, the S&P 500 index closed at 6781.48 points, down 0.21%; the Nasdaq index barely closed in the red, rising slightly by 0.01%. From the perspective of technical analysis, the rebound high point of the S&P 500 index happened to hit the weekly 20-day moving average. This position was an important support level before this round of decline, and has now turned into a key counter-pressure resistance.

Judging from the candle chart pattern, the Nasdaq closed the "cross star" after hitting the previous low. This is usually interpreted as a signal that the long and short forces have reached a temporary balance at a key position, indicating that the downward momentum has temporarily exhausted and buyers have begun to try to enter the market. However, this signal is not enough to confirm a trend reversal. If the key price cannot stand firm in subsequent trading days, this position may only be a relay of decline.

The current focus of the market is whether the index can stabilize above 6800 points. Judging from the volume profile, a large amount of trading volume has accumulated near the 6850 point, forming an immediate resistance zone. If bulls are unable to break through the 6,900-point mark with heavy volume, thereby attracting trend traders to cover their shorts, then the recent rebound is most likely to be just a technical "dead cat jump", and the market will most likely test 6,600 points downward again, or even slide towards the early gap support.

Market structure signals: sector rotation and capital hedging

By analyzing the flow of funds between different sectors, we can find that the market is in a typical "defensive posture." The energy sector had recorded 11 consecutive weeks of gains before this round of oil price increases, reflecting the dual pursuit of funds for inflation trading and hedging properties. During the same period, technology stocks, especially the highly valued software sector, continued to be under pressure.

A linkage phenomenon worthy of attention appears in the fields of technology and cryptocurrency. Bitcoin and the software sector (represented by the IGV ETF) have recently shown a high price correlation. Both stocks experienced technical rebounds after falling to the long-term demand zone in the early stage. The logic behind this is that when funds were withdrawn from high-risk AI concept stocks, they did not completely leave the market, but instead flowed into the "low-lying" sectors that had suffered deep declines in the early stage and where pessimism had fully cleared up.

At the same time, traditional safe-haven assets such as gold remain strong, firmly above the 20-day moving average at the daily level. After experiencing the test of the "head and shoulders" pattern, copper prices held on to the key neckline, reflecting that there is still support on the industrial demand side and that there has not yet been a trend collapse. These signs together outline a market picture of "overall prudence and partial rotation": funds are not fully withdrawn, but are looking for relatively safe havens in different asset classes.

Macro Crossroads: Policy Game Before CPI Data

If oil price fluctuations are an amplifier of market sentiment, then the upcoming U.S. inflation data for February will be the cornerstone of macro trading logic in the coming months.

The market generally expects that the year-on-year increase in CPI (Consumer Price Index) in February will moderately decline, and core CPI is expected to increase by 0.3% month-on-month. However, there is a significant lag in this forecast - it fails to fully account for the imported inflationary pressures brought about by the recent surge in oil prices. Due to the statistical cycle, the impact of the surge in crude oil prices will be mainly reflected in the inflation data in March and beyond.

This means that the Federal Reserve is facing an extremely complex decision-making environment. On the one hand, the job market showed signs of cooling, with non-farm employment data in February falling short of expectations and the unemployment rate rising slightly to 4.4%. On the other hand, rising energy costs are re-raising inflation expectations. Swap rates used to hedge against inflation risks have moved significantly higher, showing investors' concerns that inflation may re-stabilize around 3%.

CME's FedWatch Tool shows that market expectations for an interest rate cut within the year have cooled significantly. The probability of keeping interest rates unchanged in June has risen to more than 57%, which is in sharp contrast to expectations a month ago. This revision of expectations is a direct reflection of the market's re-pricing of "stagflation" risks.

Conclusion

To sum up, the global financial market is currently at an extremely sensitive balance point. Although the historic earthquake in crude oil has temporarily subsided, it reveals that in the highly leveraged derivatives market, any small geopolitical signal may be multiplied. The stock market's repeated competition for key technical positions is essentially a game between the inherent thinking of "buying on dips" and increasingly severe macro risks.

The next direction of the market will depend on the evolution of the following variables: whether the geopolitical situation will cool down or new variables will emerge; whether the upcoming inflation data will confirm or falsify the market's "stubborn inflation" expectations; and whether the Federal Reserve will give priority to economic growth or price stability when facing the pressure of "stagflation".

Until then, the market will be characterized by high volatility and extreme structural differentiation. In terms of technical analysis, whether the S&P 500 Index can hold the key support of 6,600 points and regain its 20-week moving average will be the core basis for judging the strength of the mid-term trend. Before this uncertainty comes to light, remaining sensitive to macro data and respecting the key price points given by the chart may be an effective strategy to deal with the complex situation.