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SPOTCRUDE

OIL: Day 3 breakout traders long in the marketHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 Friday DAY 3 Closing Range ✅ 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout ✅ 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside ✅ Backside 4. THESIS: Long: secondary, I won't exclude the possibility for this market to setup for a long trade, the market performed a higher high on the HOW and started dropping, currently consolidating. Short: primary, Day 3 long breakout traders, HOW, is most of the time a reversal signal, but considering the overall level and behaviour of price, before NY session start I can see more a pump and dump. Price still on the frontside, so I won't be looking for a dump all the way down back to the LOW, unless news release at 10:30am NYT will be catalyst. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDEShort
by GianniPichichero
1
Spot Crude Oil 30-Minute Chart AnalysisStrategy Overview: The chart shows Spot Crude Oil on a 30-minute timeframe, where price action is consolidating around the 70.00 USD level. The market is currently trading in a tight range, suggesting the possibility of an upcoming breakout. Key Levels: Support Levels: The price is finding support at 69.871, which acts as a critical level for potential upward movements. A break below this support could signal further downside momentum, possibly testing lower levels around 69.399. Resistance Levels: The nearest resistance sits at 70.431, where the price may face selling pressure if tested. Further resistance is identified in the 72.00-72.50 zone, marked as a strong supply area. A successful breakout above this resistance could indicate a stronger bullish move in the medium term. Trading Strategy: Buying Strategy: A buy entry can be considered near the support level of 69.871, with a stop loss just below this level. The first target would be the 70.431 resistance zone, and the second target can be the 72.00-72.50 range. Selling Strategy: If the price fails to break above 70.431, a short position can be initiated targeting a pullback towards 69.871. A break below this level would confirm the bearish momentum. RSI Confirmation: The RSI indicator is showing neutral momentum, hovering around the middle range. A breakout above 70.431 may be confirmed if the RSI moves into overbought territory, while a drop below 69.871 could push the RSI toward oversold conditions. Conclusion: With price consolidating between 69.871 and 70.431, this chart suggests both buying and selling opportunities based on how the market reacts to these key levels. The upcoming sessions could see either a breakout above resistance for bullish continuation or a failure that could result in a bearish correction.
PEPPERSTONE:SPOTCRUDELong
by Nigouk
OIL: inside day, first red day, 3 days pump and dumpHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week ✅ Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day ✅ First Green Day 3 Days Long Breakout 3 Days Short Breakout Inside Day ✅ 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside Backside ✅ 4. THESIS: Long: secondary, the inside day can give either a reversal or trend continuation setup, depending on how it sets up. It's just broken out, eventually it will consolidate till 10:30am MRN, I would be willing to take a reversal LOD back to the HOD of the inside day. Short: primary, potential weekly pump and dump, price currently on the backside move. Not really the 3 session setup I like to trade, but space enough to take a good RR short trade. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDEShort
by GianniPichichero
OIL: First red day, as well pullback on previous weekly highHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week ✅ day 2 cycle Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day ✅ First Green Day 3 Days Long Breakout 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside Backside 4. THESIS: Long: secondary, but still a potential possibility for oil to keep going higher, why? Because the market broke out the previous high of week, and now is pulling back on it, consolidating for a potential trend continuation. The 3 sessions setup could be getting ready for it, but I will prioritise the short view. Short: primary, first red day, Monday pumping day, typical for a 3 days pump and dump. However the 3 session setup is not ready for this move, news on calendar, is a move that can be completed with nfp on Friday. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDE
by GianniPichichero
18
A technical view on the Crude market - what happens next?Taking a short-term view, the oil market feels delicately poised and what happens over the next 24-48 hours could be very telling for the near-term passage of play. After a near 14% rally from the 4 June lows, which took price through the May range highs of $80.91, and after a huge bullish position adjustment in both Brent and WTI futures, we’ve seen price pull back to test this former breakout point – if crude now kicks higher, confirming the bulls are happy to support, it would suggest the bulls have a platform to take this back above $82.16 (21 June high) for a possible trend higher, where pullbacks should be shallow and a move into $84.87, even $86.00/20 would be our targeted play. Conversely, a failure to hold $80.91 would suggest a change in the market structure and alter the skew in the distribution to one where we see higher probabilities of a move back towards $78.50, even $76.00
PEPPERSTONE:SPOTCRUDE
by Pepperstone
OIL: Day 3 long breakout traders in the market, HOW reversalHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 ✅ day 2 cycle Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout ✅ 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside Backside ✅ 4. THESIS: Long: secondary, no FRD signal, however the behaviour is pretty similar. In this kind of scenario, considering the market already dumping, if it start consolidating for a false break reversal in a daily overview, I would be happy to have a scalp long. Short: primary, weekly failed breakout, 3 days long in the market, price now on the backside move also in bigger timeframes, I will be looking for a sell high targeting the LOW. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDEShort
by GianniPichichero
6
OIL: Day 3 breakout traders long in the market, DAY 3Hi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week ✅ no daily cycle Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout ✅ 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside ✅ Backside 4. THESIS: Long: secondary, considering the market still on the frontside move, no other strong reversal signal, I wouldn't exclude a potential trend continuation if market dump into the yesterday HOD, consolidating till 10:30am OIL news. Short: primary, although I don't expect a massime move till FOMC, the market pumped for 3 days, breakout as well the previous HOW. Currently the 3 session setup can setup for a scalp short, however, I will update the daily overview after the news release. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDEShort
by GianniPichichero
8
OIL: Day 3 breakout traders long in the market, frontside Hi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range ✅ no daily cycle Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout ✅ 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump Dump&Pump ✅ Frontside ✅ Backside 4. THESIS: Long: primary, breakout traders short still in profit from monday NY session, the breakout as well left a gap which usually is the most common place to be filled. Potential weekly dump and pump template can be completed (not necessary by today). The market closed in balance on Friday, and no other time frames are triggered yet. I will be waiting for a daily level to be triggered, and if a buy low setup will present, I will take it without any hesitation! Short: secondary, Wed to Fri I can see a potential "escalator up", which during the week it can lead to a short move going back into the low of week. However, the market opened inside the previous week, so let it to setup! Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDELong
by GianniPichichero
10
OIL: First green day, three days cycleHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 ✅ day 3 cycle Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day ✅ 3 Days Long Breakout 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump Dump&Pump ✅ Frontside Backside ✅ 4. THESIS: Long: primary, by tomorrow with the NFP, we can definitely see this great weekly dump and pump scenario completed, second hour NY session I will be looking for a buy low setup, back at least to NY session Monday morning. Short: I do not exclude price going back lower, retesting the LOW, however I wouldn't be interested today in this scenario. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDELong
by GianniPichichero
4
OIL: Day 3 shorts traders in the market, still backsideHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range Tuesday DAY 2 Initial Balance ✅ No cycle Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout 3 Days Short Breakout ✅ Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside Backside ✅ 4. THESIS: Long: primary, today is Tuesday, day 2 of the week, low of the week as well, opening range in place and market kept breaking down. However, I would be interested in taking a reversal trade as a scalp, back into the breakout of yesterday low, scalp LOD(LOW) to Yesterday LOD) Short: N/A I would not have any level to enter a potential down move, unless, and I repeat, unless before 10am the market will reach the previous LOD Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDE
by GianniPichichero
4
OIL: Day 3 breakout shorts in the marketHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range ✅ No cycle started yet Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day 3 Days Long Breakout 3 Days Short Breakout ✅ Inside Day 3. WEEKLY TEMPLATE Pump&Dump ✅ Dump&Pump Frontside Backside ✅ 4. THESIS: Long: secondary, many times, day 3 shorts in the market are a strong reversal signal, especially during Wednesday or Friday (which closes the week). From Friday NY session the market dumped down and currently it looks consolidating on the low, with a chance to push higher stopping the previous and most recent level short (I would define it a long scalp) Short: primary, market still on the backside, a lower low into the LOW can be a great clue of daily pump and dump back into the LOW or previous LOW. Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDEShort
by GianniPichichero
6
OIL: First green dayHi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” 1. DAY OF THE WEEK (Failed Breakout, False Break, Range Expansion) Monday DAY 1 Opening Range ✅ day 2 cycle Tuesday DAY 2 Initial Balance Wednesday DAY 3 (reset DAY 1) Mid Point Week Thursday DAY 2 Friday DAY 3 Closing Range 2. SIGNAL DAY First Red Day First Green Day ✅ 3 Days Long Breakout 3 Days Short Breakout Inside Day 3. WEEKLY TEMPLATE Pump&Dump Dump&Pump ✅ Frontside ✅ Backside 4. THESIS: Long: This market could coiling for an explosive move back to the previous HOW, where short traders are still in profit Short: I do not exclude the secondary scenario of pump and dump starting from Friday, eventually evolving during the further days Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDELong
by GianniPichichero
10
OIL: Monday closed as First Red Day Hi everyone and welcome to my channel, please don’t forget to support all my work subscribing and liking my post, and for any question leave me a comment, I will be more than happy to help you! “Trade setups, not movements” Let’s jump into the Technical Analysis: WEEKLY TEMPLATE (1hr chart): Yesterday, Monday, the market broke through the previous HOW and failed, closing the day as a first red day. Since the last Wednesday the market pumped up and now look like starting the backside move of a big template of pump and dump DAILY TEMPLATE (15min chart): Asia and London session mostly dumped all the day, breaking the current low of the week THESIS : In the short scenario this market can go fo a range expansion, targeting the previous LOW, it would be my main trading opportunity. In the long scenario, considering money on top at the HOW, I would be targeting the yesterday CP(HOD) or current HOW if strong momentum is presented. SETUP : Short: pump at least into previous LOD(LOW) Long: Low in place, consolidation for 30/45 min and second/third hour NY session reversal Please note that the purpose of my analysis is to help me and you hunting the best trade setup for the day, none of my technical aspects are a way to forecast any directional market movement. Gianni
PEPPERSTONE:SPOTCRUDE
by GianniPichichero
10
Crude trader - trying to price certainty in conflict The high on our Brent crude price has been $89.68 – hit at midday – but while our clients are long of crude (65% of open interest is held long), we’re seeing better sellers in the broader market, as we roll towards EU trade. The early rally felt reasonably orderly, but a lot of questions were being asked and without many immediate answers to obtain the certainty we crave as market participants - so naturally in this backdrop we get outsized moves, as a lack of clarity causes dispersions in price. When it comes to knowledge most market participants are now military experts and have quite poor knowledge of Middle East relations – again this makes it harder to price risk. Our US crude price sits up 3.8%, off the earlier highs of $87.45 and holds the 50-day MA – should EU/UK traders come in and buy the slight intraday dips then $89.03 is the level to watch topside for supply. It could go either way, but on balance I favour selling into intraday rallies. Today been some reversal after the recent drawdown in crude into $82 – positioning played a big part in that run, but we had seen signs that the Saudis may look at increasing production at year-end. We had even seen positive steps at a geopolitical level; brokered by the US, an agreement that Saudi would recognize Israel and as MBS said, forge “the biggest historical deal since the end of the Cold War”. Instead of this positive backdrop, we have seen a 180-degree turn with Hamas's attack on Israel, with the market now questioning if we could see engagement with Hezbollah and Lebanon. With President Biden standing firm with Israel, the view is Iran’s oil exports which have been growing will be cut. If we look at Crude ‘time spreads’ – that is, front-month crude futures – June 2024 futures - we see this +$0.97, so modestly higher – if we really felt like Saudi production was going to get impacted by the unfolding situation then this would higher still. If in doubt, switch gears and head to Nat Gas which is building on the recent breakout and looks like it may start to bull trend.
PEPPERSTONE:SPOTCRUDE
by Pepperstone
SpotCrude – higher levels starting to impact risk Further highs in crude have been seen in this momentum move. This time courtesy of some punchy OPEC forecasts for a 3.3m barrel p/d deficit in Q4. The IEA (International Energy Agency) are due to provide their update in the session ahead, and one can also expect a change in the forecast, given they previously pencilled in a 230k bpd deficit. $90 is the obvious round-number target for longs, ahead of the Oct 2022 highs of $93.52. Clients are biased to fade the move here though (61% of open positions are now held short), but while crude is certainly overbought one considers the trigger for a pronounced mean reverting move. Higher levels from here are likely going to increase market anxiety, where we see inflation expectations rising once again.
PEPPERSTONE:SPOTCRUDELong
by Pepperstone
1
Crude trader - closer to a mean reversion rally Having reached the double top target, we see that Crude is now 15% below from its 50 day MA - in the past 2 years we've been as stretched as 17% below this average before we saw solid mean reversion kick in - we are in oversold territory and that offers an elevated risk of short covering By way of flow, we now see 67% of open positions in crude are now held long by clients, so they see upside - the selling pressure seems to be supported and the buyers are having more of a say. Is price putting in a ST low? It seems to be the case - while we're yet to see momentum truly shift, it feels like the prospect of a squeeze higher has risen
PEPPERSTONE:SPOTCRUDELong
by Pepperstone
$70 crude coming? A major (bearish) development in oilThe technicals in crude continue to break down as the buyers stand aside – the 26 Sept swing low looks close to being taken out at $76.61 and a break here sees $65 come into play – it does feel like these lows will be tested, so a short bias is preferred. The fact we see crude down 4% when copper is up 1% speaks to the EU price caps as the driver, over just a China Covid and an economic/demand story. I think it's important to look at the crude futures curve – On TradingView I have shown the difference between the continuous front month contract and August 2023 contracts (code CL1! -NYMEX: CLQ2023) – this is now eyeing inversion, having been as high as $11. 90 in October. This is a big development in the crude complex as it removes a key reason for funds/producers to hold longs for the roll down into the next contract on expiry. What else has caused the moves on the day? • Poor liquidity – everyone watching Ger vs JAP - obviously many market ballers are off now for US Thanksgiving • EU price caps on Russian exports came in a $65 to $70, perhaps higher than consensus – not that Russia will comply and work with countries that apply such caps – but I guess the view is given the caps are higher, and Russia is selling crude at discounts of c.$20 p/b, that these caps won't affect Russia supply • The DoE Weekly Inventory data showed a 3.7m drawer in crude inventories, however, the market caught onto a 3.06m build in gasoline inventories (most since July), while distillates rose by 1.72m. I always find with the inventory report the market will see what it wants to see, but on today’s report it’s the gasoline numbers that have won out • China Covid restrictions – obviously still highly fluid but it is influential on the demand side of crude’s driver – traders seeing new mobility controls in the city of Zhengzhou and PCR testing – we watch Beijing and Shanghai as always given the record case count sweeping the country. We gear up to the next OPEC meeting on 4 Dec, which could even more focus if price breaks $70 – we have our eyes on US payrolls then but the OPEC meeting could drive some solid cross-asset vol.
PEPPERSTONE:SPOTCRUDEShort
by Pepperstone
Global recession - short commodities remains the default play Europe now gets the full attention – we’ve seen Germany’s trade surplus completely eroded, turning negative and into the first deficit since 1991 – clearly impacted by the reduction of Russian gas imports. Germany has been heavily reliant on Russian gas imports and the flow-on effect is we could be looking at gas rationing through the European winter and a potential bailout of Germany’s largest gas importer (Uniper). A recession in Europe looks all but certain this year, and this makes the ECB’s life incredibly challenging – they have a deteriorating growth outlook, very high and persistent inflation and worries about peripheral bond yields blowing up. EU Nat gas (NG) prices are not something they can control, and we’ve seen prices rally 100% in the past 16 days, so this is a brutal juggling act for Europe – Europe is in the eye of a storm right now, especially with China maintaining a strict line with its Covid zero policy. News that airline SAS has filed for bankruptcy won't help matters either. Europe may command the closest attention, but this is a global problem. In a world of rising interest rates and central banks hellbent on putting the inflation genie back in the bottle, we’ve seen clear evidence of demand destruction – commodities have been the default expression of this thematic and right now there is just no visibility on growth or what changes the trend – even though the market lives in the future, it feels like this gets worse before it turns around. The result is no one wants EURs, or GBPs, and commodity currencies (AUD, NZD and NOK) find few friends either – the trend really is one’s friend and everyone asks when EURUSD hits parity. So the USD reigns supreme, not just from a relative growth perspective but from an attractiveness as an investment destination. Right now, aside from the USD, only the JPY looks like a compelling long in G10 FX. What’s clear is that the USD strength is feeding back again into negative commodity price action – commodities face a war on two fronts – demand destruction and king USD and this is causing some intense bear trends in commodities, and it wouldn’t be a stretch to think the systematic trend-following crowd would already be running hefty short positions in copper, silver, gold, US gasoline and AG’s like wheat and soybeans. Until we see signs of a turn in the USD then rallies in all these markets will likely be jumped on by the short-sellers. That even includes XAUUSD, which is trading at YTD lows and sold consistently into the 8-day EMA – Until these dynamics change then it feels like gold is destined for $1750. If the USD remains bid, perhaps look at gold exposures in AUD or EUR (XAUAUD or XAUEUR) and there may be scope for a topside range breakout. However, even then, I will want to wait for a move to take place and let the market reveal itself. The elephant in the room, aside from EU NG is crude – Our SpotCrude price briefly traded below $100 and SpotBrent into 103.53, although have been supported below the figure. Headlines that one US bank is projecting that Brent crude could head to $65/bbl in a recession may have impacted, but it’s the demand side of the supply/demand equation which is being examined and we heard concerns of falling demand from Vitol Group (one of the world’s largest oil traders) on Sunday. The world could use a weaker crude price, although from a risk perspective it's better if it’s driven by additional supply and not falling demand – the issue with supply is that OPEC is struggling to meet current quotas as it is so additional supply seems a tall order. Having broken the April trend support, the rising probability is SpotCrude looks to test the March/April lows of $93.47/93.98 – selling rallies into 104.00. Commodities are the default expression of recession risk – crude and gold get the flow from clients but for those who like momentum and trend this is the space to pay attention to.
PEPPERSTONE:SPOTCRUDEShort
by Pepperstone
1
The disinflationary message evolving in commodities (and rates)Fed Chair Jay Powell stole the limelight in his testimony to the Senate and despite all we’ve heard pricing for the July FOMC meeting hasn’t shifted – the markets expect a further 75bp of hikes. What we have seen is solid buying in the US treasury market (2yr USTs were -14bp), while commodity markets evolve to show greater signs of recessionary fears, with copper (-2.4%) and crude (-5.7%) getting strong attention. Falling commodities should be welcomed, as it breeds disinflationary pressures, however, this dynamic becomes far more bullish for equities if it’s driven by the perception of rising supply, not demand concerns, which seems to be the case now. The message in commodity markets is a factor we’re seeing now in breakeven rates – or inflation expectations - where 2-year inflation expectation rates sit at 3.68%, having been as high as 4.97% in March, and the trend is now lower. It almost feels like yesterday was a defining session and the message we’re hearing now from commodities has to be on the radar, notably SpotCrude which is through its 100-day MA and April trend support - $100 is the call, where we could then head to $92 (the level crude sat before the Ukraine invasion). Go into the rates market and look at Eurodollar futures and see 40.5bp of cuts priced for 2023. What is clear is the market views a recession as increasingly likely, a view heard from Powell, who detailed that a recession was a possibility but not their intention. Equities have held in well despite the falls in commodities, altogether there has been rotation into low-risk areas of the market and defensive sectors, with predictable outflows from energy and materials stock. Many question when we get consensus earnings downgrades, and as we look to the US 2Q earnings season (July), it feels just a matter of time before we see consensus earnings being chopped up. While this sounds negative, this needs to happen before I can think about calling a low in risk with any conviction, but the idea that when we see EPS revisions and central banks potentially sharing the same message the rates market and pivoting, is where I think we get a strong rally in growth equity, crypto and gold. We’re not there yet but it’s coming…
PEPPERSTONE:SPOTCRUDEShort
by Pepperstone