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.