EJFQ Analysis | Volatility Inevitable on Triple Witching Day, US Stocks Move with Oil Prices

On the eve of the Federal Reserve’s policy meeting, Wall Street stocks rebounded across the board on Monday (16th). The S&P 500 index components rose at a rate of 75.9%, the strongest since early February. All 11 sector indices reported gains, marking the second such occurrence this year after January 21. The S&P experienced a roughly 5% correction, seemingly stabilizing, but a closer look at internal indicators reveals underlying turbulence.

In terms of market breadth, the ratio of S&P 500 components trading above their 10-day and 20-day moving averages (short-term breadth) remains below 30%, supporting a cautious stance. Additionally, the 14-day Relative Strength Index (RSI) for components, which measures overbought/oversold conditions, recently surged to 16.3%, the highest since the sharp decline triggered by the “tariff war” in April last year. This suggests that any current gains should be viewed as mere rebounds rather than the start of a new upward trend.

In fact, there are no reliable signs of a market bottom yet, such as a surge in trading volume or widespread capitulation (stop-loss selling). Conversely, the S&P faces resistance from the clustered 10-day, 20-day, 50-day, and 100-day moving averages, each acting as a barrier to further gains. Moreover, several major events this week could add to market uncertainty.

First, the Federal Reserve’s decision will be announced early Thursday Hong Kong time, along with the latest quarterly economic projections (SEP) and dot plot. With Chairman Powell’s term nearing its end and oil prices highly volatile, the signals he sends—hawkish or dovish—will influence investor risk appetite. Second, Nvidia will hold its GTC conference for four consecutive days, likely bringing new focus to AI developments and dominating the performance of major tech firms. Additionally, Friday (20th) is “Triple Witching” (simultaneous expiration of stock index futures, stock index options, and stock options), which could intensify market volatility.

Triple Witching occurs four times a year, on the third Friday of March, June, September, and December. Notably, the bursting of the tech bubble in March 2000 and the COVID-19 crash in March 2020 coincided with Triple Witching days, raising concerns that this March could see a repeat of history. For example, tracking the S&P ETF (SPY), bearish sentiment is unusually high, with the put/call ratio reaching 1.98, concentrated around the $660 level—equivalent to 6,600 points on the S&P 500—indicating the market could test the 200-day moving average “bull-bear boundary” (currently at 6,608 points). Investors should remain cautious about downside risks.

Currently, the market’s “voice” still largely depends on oil prices. As shown in the chart, Brent crude (inverse coordinate) and S&P E-mini futures (one of the most liquid derivatives globally, tracking the S&P financial futures contracts, often used to gauge reactions to economic data, earnings reports, and geopolitical events) have recently moved almost in tandem, with a correlation coefficient of 0.969. In the short term, the S&P is likely to continue reacting to oil prices driven by geopolitical news.

ICBC Investment Research Department

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