Brent markets fell last week, reaching down below the $53 level that is the signal we are going to reach the $50 level. That’s why, I believe it’s only a matter of time before we sell off below there as well, but it could cause a bit of a bounce. Any way I am waiting for good moment to open short positions, not long, because the supply issue continues to be a major issue, and with that it’s likely that we will continue to see sellers coming back into this market. I do believe the market has all chances to reach the $40 level, but that obviously is a longer-term move.
The markets should continue to go lower, as people begin to accept the fact that even major players like Exxon are starting to talk about oversupply been an issue for the long term.
WTI Crude Oil
The WTI Crude Oil fell as well, breaking the $50 level. Finally we went out of the range, and I believe market will continue to go much lower, perharps reaching the $45 handle. How to enter the market? I expect short-term rallies to be selling opportunities, and I believe that the $45 level will be targeted initially or even lower. The oversupply has finally taken over the attitude of the market. Anytime this market rallies, I think it’s only a matter of time before we sell off. Even though the OPEC production cuts have been front and center, we have not seen a massive reduction in supply. Quite frankly, it has gone the other way and OPEC has lost its ability to control the market.
DAX gapped lower on Friday, but on results of week It sliced through shooting star from previous week. The 11,650 level underneath seems to be the “floor” in this market and I believe it will attract buyers into the market. I’m waiting for a supportive candle or a bounce to set longs in such a strong uptrend and believe market will reach 12 400 level given enough time.
Germany is main EU economy and good reports attract more buyers. So, I believe pullbacks should offer value and market will continue its uptrend, as most of other EU indexes.
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On Tuesday U.S. stocks closed lower becouse of investors doubts That President Trump will provide details about his economic polices and his speech Tuesday night will be more focused on immigration policy. These doubts were confirmed during speech and investors di not get details on reform taxes or how Trump intends grow the economy through agressive fiscal spending.
I think nearest time we cann a bit “tired” market, as investors want to see some actions from President or at least get details of his future plans. As a rule investors give 100 days for new president to roll his agenda. With that being said, I do not wait for trend reversal now, but I would not be surprised by near- tearm correction.
Any complications now may grow concarns that Trump may not be able to accomplish any of his economic policy plans. Once again, It does not mean trend reversal. Economy needs time for growth along with earnings.
If Fed raise rates sooner than expected, It will cool down the economy. Every day Fed seems to be more and more ready to raise rates. Strong growth and a heated-up economy will draw the attention of the Fed who seem to be ready to raise rates before the economy get too hot. A sooner-than-expected rate hike by the Fed will likely cool down the economy. Investors are ready accept two rate hikes, but three can be to difficult to handle. March rate hike increases possibility to see 3 hies this year.
If stocks do weaken on Wednesday, It will be a sign of frustration with Trump over the lack of details for his economic plans. If it comes in lower than expected then stocks may turnaround and post new record highs by the end of the session.
Gold futures posted a strong rebound rally on Wednesday after the U.S. Dollar reversed down from a one-month high reached after the U.S. reported stronger-than-expected economic news.
April Comex Gold futures closed at $1233.10, up $7.70 or +0.63%.
Despite the strong economic data, the price action suggests that traders may feel the Fed is still not ready for a March rate hike.
In economic news, the consumer price index (CPI) rose 0.6 percent in January, above the expected 0.3 percent increase. Retail Sales rose 0.4%, beating the 0.1% estimated, but coming in below December’s read of 1.0%.
On Wednesday, the Labor Department reported that U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting that inflation pressures could be picking up.
In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012. Economists had predicted an annual rate of inflation at 2.5 percent.
In other news, the Empire State Manufacturing Index also beat expectations with a reading of 18.7. However, Capital Utilization came in at 75.3%, slightly below the estimate and the previous read of 75.6%. Industrial Production also disappointed with a minus 0.3% showing. Nonetheless, investors were primary focused on the retail sales and inflation data.
On Tuesday, Federal Reserve Chair Janet Yellen said that delaying interest rate increases could leave the Fed’s policymaking committee behind the curve. This remark helped pressure gold prices.
On Wednesday, in her second day of testimony before Congress, Fed Chair Janet Yellen acknowledged that the economy is weak, but said Fed policies have been a help, not a hindrance.
These two remarks by Yellen appear to be offsetting which may be the reason behind the dollar’s break from highs and gold’s reversal to the upside.
Technically, gold’s reversal is bullish on the charts. If the momentum created by the move continues then buyer should easily take out resistance at $1236.60. If they can accomplish this with rising volume then we may see a retest of the recent top at $1246.60.
With Yellen’s testimony out of the way and the inflation data, traders are likely to react to the European elections and Trump’s policies over the near-term. Both could provide support.
Reports on Thursday include U.S. building permits, the Philly Fed Manufacturing Index, weekly unemployment claims and housing starts.
A once-popular trade against Chinese-listed stocks in Hong Kong has all but dried up as the world’s second-largest economy defies naysayers and its equity markets rally.
Short interest on BlackRock Inc.’s Hong Kong-listed FTSE China A shares ETF declined to a one-year low of 3.5 percent of shares outstanding on Monday, according to data from Markit. China Asset Management Co.’s Hong Kong-traded fund tracking the same index recorded short interest of 3.99 percent of shares outstanding, the lowest since July 2016.
Fears of a hard landing for China’s economy have mostly subsided as mainland authorities in the past year moved to stem capital outflows, shore up stock markets with cash injections and curb excess leverage by ordering banks to limit lending. At the same time, non-performing loans on bank balance sheets have failed to translate into big losses, frustrating some perennially bearish hedge funds.
“Investors are less negative on China A shares this year,” said David Quah, head of ETFs at Mirae Asset Global Investments, a unit of Mirae Asset Financial Group. “Since the A-share market crash from its peak two years ago, the continuing high liquidity in mainland China may again see local funds rotate from property and commodity bubbles, so people think the A shares will come back up.”
The BlackRock ETF is up 5.6 percent this year, though still down 30 percent from its June 2015 peak. The MSCI China Index has rallied nearly 30 percent from a year ago. A share ETF stock borrowing positions have “unwound to very low levels” since mid-December as China’s manufacturing data has improved and the market itself has made gains, according to Susan Chan, head of ETF and indexing investment for Asia-Pacific at BlackRock in Hong Kong.
“It’s encouraging that short interest is now low and a clear sign that the mood has become more positive,” said Marco Montanari, head of passive asset management for Asia-Pacific at Deutsche Bank AG. The good news on the economy is “a key reason why short interest and outflows have reduced.”
In addition to declining short interest, both ETFs have experienced significant outflows from a year ago, hurting their popularity with hedge funds and other speculators. Investors have withdrawn a net $1 billion from BlackRock’s fund and $111 million from CSOP’s since February 2016, according to data compiled by Bloomberg.
“Hedge funds and short sellers don’t want to pull the trigger now if liquidity is low, as they can be short-squeezed and can’t put on a large enough trade,” said Melody He, head of ETF and index solutions at CSOP Asset Management Ltd. in Hong Kong. “There isn’t a big trend either way so we don’t see much long interest either.”
The firm that invests the personal fortune of billionaire investor and philanthropist George Soros eliminated its shares in Barrick Gold Corp in the October to December period, the fund’s last remaining stake in bullion after dissolving its shares in the world’s biggest gold exchange-traded fund SPDR Gold Trust in the previous quarter.
New York-based Paulson & Co, led by longtime gold bull John Paulson, cut its stake in SPDR Gold Trust to 4.4 million shares, worth $478 million, from 4.8 million shares, worth $600 million, at the end of the third quarter, according to filings with the U.S. Securities and Exchange Commission.
Spot gold prices fell to a 10-1/2-month low at $1,122.35 an ounce in December, following the U.S. presidential election and after the U.S. Federal Reserve sounded an unexpectedly hawkish note on U.S. interest rates.
Paulson held stakes unchanged in AngloGold Ashanti Ltd, IAMGold Corp and RandGold Resources Ltd, but reduced them in NovaGold Resources Inc, the filings showed.
In the fourth quarter, spot gold prices dropped 12.5 percent, their biggest quarterly tumble in 3-1/2 years. Prices rallied briefly after Donald Trump won the U.S. presidential election in early November, but then fell.
By early February, prices reached a three-month high as attention shifted to worries over Trump’s policies and political risks posed by elections in Europe.
Earlier this month CI Investments Inc, an investment manager of Toronto-based CI Financial Corp, reported that it also cut shares in SPDR Gold Trust and dissolved shares in Barrick Gold, though it held onto some of its shares of option calls in the miner.
When successive coin flips turn up heads, a gambler’s instinct would dictate the next toss results in tails — even if the odds are still 50-50.
That’s the so-called gambler’s fallacy, and financial markets are at risk of making the same mistake of emphasizing past precedent when it comes to Federal Reserve interest-rate hikes, some investors warn. While traders have been lulled by a record of the Fed proving less hawkish than expected, things could change over the coming year.
The scenario some are eyeing: the Trump administration’s coming fiscal stimulus spurs a rapid pick-up in inflation, given the lack of slack in the U.S. economy, with unemployment historically low. Fed Chair Janet Yellen, who has overseen just two rate rises since taking the helm three years ago, then might need to move faster, triggering a surge in the dollar.
“Trump will be inflationary,” Vimal Gor, head of income and fixed interest at BT Investment Management, which has about $67 billion under management, said at a conference in Sydney Tuesday. “The curve out for the next couple of years looks woefully” low in its interest-rate expectations given the likelihood of a Fed response to changing fundamentals, he said.
Though Yellen on Tuesday underscored that the Fed should avoid waiting too long to remove policy accommodation, and flagged that March would be a “live” meeting to consider raising the benchmark rate, markets still are discounting just two hikes this year. Looming in investor memories: the Fed at one point anticipated four moves in 2016, only to enact one.
Yellen also highlighted that the outlook supports higher rates with or without President Donald Trump enacting fiscal stimulus — read about that here.
It has been rare for the Fed to surprise on the tighter side of policy, though under Ben S. Bernanke it was charged with moving too slowly to ease as credit markets seized up in the summer of 2007. The dollar climbed briefly in May 2013 when Bernanke warned of the potential to taper quantitative easing, and advanced in January 2005 when the Fed unexpectedly said rates were “below the level” needed to slow inflation.
“Trump runs the risk of overstimulating the economy,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “At basically full employment, an injection of fiscal stimulus soaks up spare capacity, and that’s associated with rising inflation. The Fed at the moment is very dovish and they’ll only change their spots if inflation supports doing so.”
The experience of other developed nations shows what can happen when central banks turn hawkish. Australia’s dollar jumped almost 50 percent during 2009 and 2010 as a mining investment boom saw the Reserve Bank boost rates by 1.75 percentage points. The Canadian dollar climbed more than 5 percent in 2010 as the Bank of Canada bolstered its benchmark to 1 percent. Both countries, and New Zealand, saw policy makers reverse course after currency strength contributed to undermining economic growth.
“The Fed could actually turn hawkish and tighten policy too much,” Joachim Fels, chief economic adviser at Pacific Investment Management Co., told the Sydney conference via a video link on Tuesday.
One wild card on Fed policy is the makeup of its board. Two of the seven positions are open, and a third member’s pending resignation gives Trump almost half the slots to fill. And later this year, markets may be caught up in speculation on a successor to Yellen, whose term as chair ends in February 2018.
Michael Every, head of financial markets research at Rabobank Group in Hong Kong, encapsulated investors’ premise about the outlook, in a note after Yellen’s first of two semiannual congressional hearings on the economy:
“It is not like the Fed we all know (and love?) to ever dare to surprise us with a hike” that investors weren’t certain was coming.
Fans of the precious metal – not shy of a good conspiracy theory – have been deliberating over the move ever since Germany detailed it back in 2013. Initially, there was a sense that trust between central banks had broken down with claims that Berlin was effectively questioning the credentials of New York Federal Reserve.
But the talk has now stepped up a notch with the Bundesbank confirming Thursday that it has already moved 583 tons of gold out of New York and Paris. Its plan to hold half its gold in Frankfurt is now three years ahead of schedule.
Reporting the news, Reuters said that some argue the world’s second-biggest bullion reserve “may be needed to back a new deutsche mark, should the euro zone break up.” This seems pretty far-fetched, especially given that the Bretton Woods system of fixed exchange rates ended back in the 1970s. Could Berlin really be prepping for the fall of the euro?
Then there’s the Donald Trump angle. On Thursday, Bundesbank board member Carl-Ludwig Thiele felt the need to speak about the new U.S. president at his press conference – presumably because someone asked him.
“Trump has not triggered a discussion about the storage facility in New York,” he said, according to reports. Trump scaring global central banks to repatriate their gold in case he confiscates it? Sounds equally unbelievable.
Then there’s the rumors coming from Russia. Sputnik News, which incidentally has strongly denied accusations from NATO that it’s a Kremlin propaganda machine, reported that Germany had been given the wrong gold. Quoting Russian economist Vladimir Katasonov, the news site said the U.S. may have sold Germany’s gold bars years ago and hurriedly bought some back as the Bundesbank came knocking.
It seems when something major happens in the gold market there’s a conspiracy theory not far behind. Instead, the official line is a little dull in comparison with the Bundesbank saying the new storage plan is “to build trust and confidence domestically.”
In 2015, it even released a 2,300-page list of its gold bars. The list contained the bar numbers, melt or inventory numbers, the gross and fine weight as well as the fineness of the gold. It appears it’s a tough job placating the demands of the gold bugs.