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Can Oil Still be Propped Up?Our double bottom set up from last week provided us with over a 20% gain in a few hours if you did close positions at the resistance zone. On the 4 hour chart, we have been talking about a potential head and shoulders pattern. Price creating our first higher low in a new uptrend but requires a break and close above 29.00 to trigger this. So far, we have been drifting below but if we were to create a right shoulder, it would happen here. On the daily chart, there is another option. Yes, if we break and close below the 19.50 zone, we would make another wave lower. However, it seems the trend here could possibly be exhausting. Is it possible to see buyers step in here or close to here, and put their stop losses just below? Or is it possible we may create a double bottom pattern (creating a “W” shape showing us a reversal)? OPEC did come out with a 9.7 million barrel a day production cut. The market did not react well to the news. Oil still sold off on the open this week. In fact, yesterday on twitter, it seemed President Trump tried to give oil a bit of a boost, saying the actual cut could turn into around 20 million barrels a day rather than 9.7. Market still did not buy it. If that were to be true, market participants would want to see it on paper. The truth is that there is still a large supply glut. Demand is decreasing sharply, and Supply is not keeping up with that. A production cut would have to be substantially more, but of course that is difficult to do as the OPEC nations still rely on oil for government revenues. None of them really want to cut. Oil being higher is one of the keys for a prolonged market rally. On the discord chat, we are watching the US 10 year yield to stabilize…indicating some money leaving bonds for stocks, and we are watching oil. Why oil? Because banks were forced to lend to oil in 2014, and now have significant exposure to energy. When oil moves up, it impacts both the energy and financial sectors on the market. The news for oil got worse today as the IMF came out stating that this economic downturn due to the lock downs around the world will rival the great depression. 2020 will not be pretty, but 2021 will show a bounce. This of course means that if we are heading to a recession/depression, then demand for oil will continue lower. The production cuts will have to increase in order for supply to fall accordingly with demand. To be honest, I would keep an eye on the Middle East. Would not be surprised to see some sort of event there occur to spike oil. This 29 level is still key either way you look at oil: on the 4 hour chart and the daily chart.
TVC:USOIL
by Uncharted-FX
SPX: Trump was elected at 2200Hi Guys, long time since the last time. I hope you are all well and fine. Let's dive into it! March 23 - FED announced it would buy bonds in unlimited numbers and backstop direct loans to companies, the latest in a series of policy steps taken over the past 10 days to calm markets and support the economy. (www.reuters.com) SPX bounced at 2200 (red dotted line) which is the starting point of Trump's US Presidency. Please click & play the following chart posted on Feb 29 (Sat) in order to review the informations and watch it unfold: March 3 (Tue) - by cutting rates the FED managed to slow it down at 2950 but the effects of the emergency measures did not last long:(www.reuters.com) March 9 (Mon) - market keep falling. Please click & play the following chart posted on March 6 (Fri) in order to review the informations and watch it unfold: Just to note that the FED held 6 meetings in March to calm markets. (www.federalreserve.gov). TECHNICAL: - price below 200SMA (as in 2015/2016 and in 2018/2019) currently supported at 2200 (A); - price pulling back from 2200 (A) in what may be a bear rally into 200SMA at approx 50% of Covid19 downtrend from (0 zero); - VIX maybe on its way below 30 again; Questions: 1) how long will it take for the market to cross and consolidate above 200SMA and resume Progress again? 2) what what kind of recession is the COVID-19 recession going to be? V-Shaped? L-Shaped? W-Shaped? 3) Is this a virus-related recession, or is it the one economists said was on the horizon? For information iro The Flash Recession (2nd circle in red) please review the following chart posted on Apr.7, 2019: Thank you for your support and for sharing your ideas. Disclaimer: Please note that I am not a professional trader and these are my personal ideas only. The information contained in this presentation is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. Cozzamara is not responsible for any liabilities arising from the result of your market involvement or individual trade activities. IMHO: The point of trading is to make money. To make money you must have money. Depending on the money at your disposal, you can decide what to do and how to do it. By having stops you decide how much you are willing to lose. By having targets you decide how much you want to earn. Be disciplined with your protocol and with your strategies for trading. Sometime you win, sometime you lose. Don't be greedy. Be realistic. Be wary but not afraid. Be curious. Use your brain. As long as your working process make sense and your spirit is calm, everything will be fine. Be patient and be prepared for any circumtances.
TVC:SPX
by cozzamara
Gold isn't trading as a safe haven. Gold is not a safe haven, it’s a hedge from fiat currency. Portfolio allocation needs to match your personal risk-spectrum. A common misconception is that people look to gold in times of uncertainty. Gold is not a safe haven, it’s a hedge from fiat currency. A good example is comparing the price of gold to the S&P500 in 2008. Theoretically if gold was an anti-risk asset and the SP500 rises (risk-on), then the price would fall. Why? There was concern in the market that Q.E. and the expectation or rate cuts would cause inflation. It didn’t and gold rallied. Furthermore, gold has one of the worst trading sessions in a few months, which was in the peak of bullish volatility for the DXY and equities. In 2019, the dollar had a rally even though there were various Fed rate cuts. Yet now, the DXY is falling against the Euro,Yen and CHF. This has to do with the interest rate differential between rates attached to the U.S. dollar and the Euro. As you may know, the Fed has no room to lower rates at this point. Future contracts are set for a 100% chance of a hike for the next Fed meeting. My personal opinion (comparing the 3 month-10year bond yield curves) that this will be the beginning of the true deleveraging of the American Economy, right around June or July. There is greater downside adjustment for the USD rather than the the Euro, Swissy, Yen. But if you look at NZD/USD and AUD/USD, there is clear room to cut .These are both reliant on external demand vs. the internal consumption dynamic from the USD. What will happen in the coming months is a hike in interest rates, forced inflation, same huge spreads, a housing collapse, and stagflation followed by deleveraging. Maybe Jun through August. If we can get an interest rate adjustment from the Reserve Bank of New Zealand and the Royal Bank of Australia which will flatten the interest rate differential. However, against the Euro, Yen, and Frank, the Dollar will fall as there is more downside adjustment comparatively. The 50 bp cut from the Fed (the only time in history that it happened since Lehman brother) was negative which was interesting. Prior, officials stood by a “material change” to the outlook on growth. I think this proves that the Fed recognized in a fearful way—acting bold rather than sticking to their usual “wait and see” approach.
OANDA:XAUUSD
by TayFx
1
$6 Trillion and Counting.. Trying to make sense of the global financial ecosystem been tuff over the last 45 days. The question of the global economies being in simultaneous recession is well agreed by across the board. The goal of this piece is to make sense of this historic impulsive move by the Federal Reserve in the last 45 days. Printing money is digging the whole deeper in an over leveraged market that closed 2020 desperate for gains indulged in high-risk financial instruments. They should have paid the price, but instead have been saved the same way that various institutions were saved from public margin calls with public money in 2008. The wave of stimulus has been historical to say the least. I'll put it simple for comparison. The $11 trillion by the: FED, ECB, Boc, BoE, BoJ, etc is roughly 20% of the current $58 trillion in public debt owned by governments. This was all done in 45 days. This last week the total projected injection by the Federal Reserve Bank topped $6 trillion (not counting future REPO agreements that could be expanded). The most recent increase of $294 billion of securities funded by the Dept. of Treasury was added to the SOMA portfolio. The System Open Market Account (SOMA) contains dollar-denominated assets acquired through open market operations. In addition, the Fed added $650 billion in temporary credit lines to fellow banks, a slight decline form last week— but stagger never the less. The Feds injection in their balance sheet this month accounted for the entirety of the QE3 injection from 2019. My personal estimation at the stimulus total by the Fed alone with be over $7 trillion. Data since the Feds swap lines turned online last indicates an increase in an average $10 billion in federal swap lines between federal and regional banks to $358 billion— a +358% increase. The Fed announced a new facility for municipal bonds and their details on a good amount of other planned programs. The most notable— the Main Street Business Lending Program (MSBLP) has been appropriated $750 billion for loans and $75 billion in equity. Termed the “fallen angels” credit facility program, the Fed has opened $600 billion to purchase ETF’s in the secondary Market Corporate Credit Facility. These ETF I’ve covered significantly and most notably issued sells on both 3 week’s before their respective crashes. The $HYG and $JNK (the two most popular ETF’s for junk bonds) surged. This was similar to what happened in 2009. The speculation between the correlation going forward is questionable, but nevertheless pretty obvious right now at least. The performance on the U.S. dollar (DXY) in relation to the Euro is creating a tension for competition between the EUR and USD for capital inflows to their respective economies. The FED is considering a fifth stage of stimulus, which is why my estimates right now are for a $5 trillion influx by the Fed alone. The problem right now is that the lack of synergy between the Fed and the other major central banks right now is causing the same stagnation that happened in the gold and bond markets recently with bids and asks not being on the same speculative timeframe. Inflation I assume will be around 5% because of this influx. My expectation is that the recent 27% is a pullback in the current downtrend will sustain a bear market going into the next few monthly prints. Statistically speaking, looking at this bullish should only be done in lower time frames. This market is made up of different perspectives, risk-spectrums, ages, etc. Sentiment needs to be watches closely and this is why comparing a variety of intercorrelated financial instruments from different classes can lead us in the right direction. Going into next week: Europe, Australia, and other markets will be closed for holiday, but the U.S. and other Asia Pacific markets will be online. However, Monday won't be worth trading and most smart money won't be online. However, if there is a gap up or down, then the speculation that a gap on a Monday that historically shows prints of little to no change in the rate change, then this could bring around 4% of volatility is a gap down or gap up happens. Something work point out here is how quickly the balance sheet has grown recently. This can be better seen by overlaying the Fed’s weekly balance sheet over the performance of the price for the S&P500 and can see an indirect correlation that’s pretty profound. Financial Venerability Since May of last year I’ve watched closely the corporate debt—leveraged loans— and fixed income asset classes. I called in mid January that record inflows into HYG in a single day was driving an over-leveraged MBS and swap market that was on thinner and thinner pins as the US500 ascended to Trumps appraisal. The inflows that were seen well before the COVD-19 virus was relevant in financial market’s in mid January, with that Wednesday seeing a new all time record for inflows. It told me at that time that the market was desperate for debt and through highly leveraged assets backed by leveraged fundamentals that was the risk the market was beginning to take. The venerability right now lie in over leveraged debt— credit market’s that relate to corporate junk bond, sketchy municipal projects, a housing market on 2 months back-pay with interest on (Triple net properties, no tax; interest only income models), and lastly ETF’s with a printing press creating guaranteed bills for any ask ($LQD,$BND,$VCIT). The OTC released a report that global corporate debt reached $13 trillion. Naturally, if you’re looking to issue debt in a low risk environment you would do so. The downside is that they received a triple B rating— a few notches away from junk. This being said, the recent outflow and downgrades are because — as Darwin would agree— those companies and entities that were using over-leveraged and simply dubious business models (regardless of your market cap) have proven which companies in which sectors have actually had over priced PE’s for a valid underlying reason. The problem when these corporate bonds default, which will then bankrupt and liquidate firms resulting in jobs being lost. When this is multiplied into trillion of dollars, the impact foreseen on both the U.S. and especially the emerging markets and Europe which will have much more of a downside risk as the upside risk they entered into years ago than was perceived. The housing market is about to collapse and it will start in the feds balance sheet.
SP:SPX
by TayFx
13
WTI Crude - An End to the Price War?Market has high expectations for OPEC+++ The stand-out event today is undoubtedly the OPEC+++ meeting, where producers will attempt to find agreement on output that addresses the collapse in demand and crude prices. No one is winning in this environment but, as ever, each are losing to different degrees and have a different ideas on how it should be resolved. I don’t think a grand deal is as nailed on as markets would have us believe but, as ever, common sense should prevail. If a substantial deal is going to get over the line, the US must play a part in some form. It is currently hoping that a market-driven, forced production cut will be enough to convince other producers to cut but I’m not sure that will be enough. Other assurances will be necessary to get Russia on board, which is the biggest risk to a deal. That said, traders have heavily bought into this potential deal, following President Trump's tweet last week. The risk now is not just whether a deal is done but, if it is, will it be enough? I'm not sure a 10 million barrel cut will be enough to hold the gains and even 15 million may just about given the demand destruction we've seen. Should we see above 15 million barrels, it could give the oil price a big boost, with the break of $30 in WTI potentially being the catalyst for another big move higher. The next notable level above here is $35 and if producers want to see higher than this, the cut may have to be closer to 20 million and include the US in some form. Oil has jumped today on reports that Saudi Arabia and Russia have reached a deal on cuts of up to 20 million. The headline sounds good but the small print may not read quite as well. Should this be confirmed without any drawbacks in the fine print, I'd expect oil prices to rise more than they have. There's always the risk of "buy the rumour, sell the fact" strategies going into these things which is why the detail and believability is so important. From a technical standpoint, this looks like a market that's bottomed and just waiting to pounce above $30, but for that we need confirmation. A break above $30 says traders are satisfied with the cuts, at which point we may be able to look upwards for the first time in a while.
OANDA:WTICOUSD
by OANDA