Saturday, June 24, 2017

Crude Oil, Gold and Treasury Yields: Outlooks

While the Dow Jones and the SP500 SPX are still in all-time highs, Wall Street is not talking about anything other than the return of the XLK technology rally and the million dollar purchase of Whole Foods WFM by Amazon AMZN, which opens a new scenario, still indecipherable, for the beaten retail sector; topics that I will review in future posts.


In the economic agenda this week only highlights the PMI data on Friday. The weekly Jobless Report I believe that it ceased to have relevance for the market, because the 119 consecutive weeks (!) it remains under the 300,000 requests, indicate that the US labor market is at a high point. This week of 'no-news' gives me the opportunity to comment on commodities, currencies, bonds and volatility.

Crude Oil /CL


Remains in the side range $42-54 for a year, approaching $43, his minimum of 8 months. The causes are still the same that are being discussed in this blog: The US and the non-OPEC countries are not complying with the output cut set by OPEC in November last year. Their inventories, reserves and platforms (rigs) continue to rise, and if they are reduced, they are lower than the estimates. This slows down the purchases of investors and affects the fiscal plans of the euro zone and the US as it generates that its inflation is advancing very slowly.

The price is temptingly low, but I still suggest waiting for the EIA data on Wednesday, which sometimes brings surprises: if inventories fall, it should go up. One option is to use the etf USO, with a guarded swing trade.


Important crude support at $ 43 on its weekly chart. As a data, the lines blue
represents its 'value zone', or interval from which it is suggested to do trades.


Gold /GC


It comes down from the $1,300 level after the Rate Hike of the FED, which reinforced the weak dollar. Technically he has broken the SMA50 average and is fighting today against the SMA100 and soon the SMA200. Breaking them could lead to new lows of 2 months. Attentive to any geopolitical event that causes regional or global instability, since gold is the first safe haven to which investors and traders go. On my radar.

US Treasury Bonds $TLT


The comments, dovish and hawkish, coming this week from the various Presidents of the State Reserve Banks (Fedspeaks) can give a better idea of ​​where the fiscal balance and securities backed by MBS mortgages are going (mortgage-back securities), that other giant fixed income segment. Already the slow inflation, is putting the yield curve flat, with risk to bring the market to a bear flattener phase, usually a sign of beginning of a recessive cycle. 


It is expected that the FED with the application of its monetary normalization plan (via progressive ceilings for the reinvestment of treasury bonds) will force the sale of the portfolios in the long term and therefore encourage the increase of their rates of 10-year TNX notes, today at 2.19%, its annual minimum. I estimate that is the trend. 


The yield curve begins to get dangerously flat, by the Rate Hike (affects the short term) and the slowrise in inflation (in the long term). If the curve is reversed it is a sign of early recession.
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