Weekly Market Forecast: Hurricane Harvey Helps Oil and Gas Hold a Bid
This week started off in a tight range, before exploding higher on Tuesday into the overnight session.
Prices held near highs on the open Tuesday morning and we continued to chase out buy stops throughout the day, closing the session nearly 1% higher.
Here is the weekly tally in the markets:
- SP500 closed 0.65% higher
- Gold prices closed 0.43% higher
- Silver closed 0.18% higher
- The US dollar got hit Friday, closing down 0.91%
- Oil prices took a beating Monday and Thursday, closing down 1.75%
From a sector overview, we can see that most assets closed higher this week:
- Energy sector is up over 1.4%, despite oil’s weakness
- Technology stocks closed 1.14% higher
- Utilities also closed higher by 1.12% (which is unusual in an up market week)
- Financials were the weakest, but still managing to gain 0.83%
The US stock market managed to find some temporary support near the 100 day moving average, a favorite level for institutional buyers to average into their longs. However, there is also some big money waiting to stop out of their long positions below, so you can expect some volatility this upcoming week as we jockey for position.
So What Helped Markets Bounce?
Market participants were excited by potential news of Donald Trump’s much anticipated tax plan, which has stirred up excitement only to fail.
In the end, we did not find any new information about tax reform, or any in depth details.
The retail sector managed to generate some buzz, after releasing some surprising positive earnings. The retail sector has been battered for a long time, so this caught some short sellers by a surprise and forced them to cover their shorts.
Jackson Hole Symposium Effect – Euro Sky Rockets
On Friday, investors were looking forward to Janet Yellen and Mario Draghi’s comments out of the annual Jackson Hole Symposium in Wyaoming.
However, neither Janet nor Mario discussed monetary policy specifics, which was welcome news for the EURO – which rallied to 1.5 year highs.
Meanwhile, the strength in the Euro led to a big sell off in the US dollar, sweeping the previous 92.55 low on August 8th in the dollar index.
The next downside target is 91.89.
Below is a daily chart of the Euro, which is up over 13.7% year to date, in 234 days. On Friday the currency closed just over 5 points below the 1.19456 high.
The target for the Euro is now 1.2179, with 1.3479 the multi month target.
Next Week’s Economic Activity
This week we get to see another big monthly employment report.
Monday is a slow economic event day.
Tuesday, at 10AM EST we’ll see the latest consumer confidence data.
Wednesday is all about the ADP jobs numbers, preliminary GDP and Crude oil inventories, with the two happening one hour before the opening bell.
Thursday we see unemployment claims, the usual weekly figure.
Friday is the big day, with the all important non-farm payrolls report, average hourly earnings and the unemployment rate for the previous month. This is an important report that the Fed uses to gauge employment and labor markets. However, seeing as how Janet and multiple other FOMC voting members have said they are happy with the employment situation, there is only opportunity to disappoint in this report. If we see strong jobs data, it will be the expected case, with a muted bullish reaction.
Weekly Sentiment Outlook
This week we are positioned for bearish equity price and a rally in safe haven assets.
To be more clear, we are currently in these positions and looking to add to our exposure:
- Short equities, but we prefer to sell intraday rallies as opposed to holding overnight bearish sentiment
- Long gold in the swing trading account, and holding for a target of $1,310 to as high as $1,330 into seasonality (read more about gold seasonality here)
- We look to enter short into oil, now that the Hurricane Harvey rally has been fully priced in to energy (especially in natural gas)
- Long bonds and long VIX using option call spreads
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The information contained in this post 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. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.