Gasoline Prices Matter to the Stock Market

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It’s no secret that gas prices significantly impact the economy, discretionary spending and stock market prices. Gas prices were at record highs following an incredible run-up over the summer and have declined steadily until recently, as represented by the United States Gasoline Fund (UGA). Treasury yields have fallen, the dollar has softened, and oil has risen recently as OPEC+ announced it was contemplating cutting output by as much as 2 million barrels per day. These combined moves caused UNG, a U.S. gasoline ETF, to rise almost 10% over the last five trading days.

As traders speculate on a less hawkish Fed, stocks and oil continue to rebound sharply. While higher gasoline prices are good news for oil producers, they are an ominous sign for the global economy and the stock market. Gasoline prices have moderated until very recently in the U.S. partially due to less global demand. The White House also released Strategic Petroleum Reserves to subsidize costs.

The U.S. Gasoline Fund started the session in a bearish phase, then gapped higher, transitioning to an accumulation phase. That represents the first signs that the steady price decline of gasoline might be over. The price of UGA ticked up to 59.57 recently and crossed over the 50-day moving average and the 200-day moving average. Depending on the slope of the continued move, a transition to an accumulation phase presents profitable trading opportunities.

The war in Ukraine seems to be escalating, and the recent price gains in UGA could signal a new uptrend. As an investor, you should pay close attention. This accumulation phase can represent a significant potential market shift. 

Central banks are also keeping a close eye on the situation because a steep increase in gas prices could lead to global stagflation. All of this can eventually lead to a decline in stock prices. So, keep an eye on high gasoline prices, which could be bad news for stocks.

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ETF Summary

  • S&P 500 (SPY): 370 support, 380 resistance.
  • Russell 2000 (IWM): 173 support, 176 resistance.
  • Dow (DIA): 297 support, 303 resistance.  
  • Nasdaq (QQQ): 279 support, 283 resistance.
  • KRE (Regional Banks): 61.40 support, 64.00 resistance.
  • SMH (Semiconductors): 194 support, 200-201 resistance.
  • IYT (Transportation): 206 support, 212 resistance.
  • IBB (Biotechnology): 121.00 support, 124.25 resistance.
  • XRT (Retail): 58.70 support, 62.75 resistance.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Wade Dawson

MarketGauge.com

Portfolio Manager

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