World Oil Supply, Demand And Price Outlook, October 2018

The Energy Information Administration (EIA) released its Short-Term Energy Outlook for October, and it shows that OECD oil inventories likely bottomed in July at 2.806 billion barrels. It shows inventories rising in the third quarter, contrary to the normal seasonal trend. However, it forecasts that stocks will drop in December to 2.817 billion after the Iranian sanctions are expected to go into effect.

Throughout 2019, OECD inventories are generally expected to rise, ending the year with 98 million barrels more than at the end of 2018. The expected drop in Iranian production, due to the U.S. sanctions, is forecast to be more-than-offset by increases from other producers, such as the U.S., Canada and the Gulf states of Saudi Arabia, Kuwait and the UAE.

oil inventories

Crown Prince Mohammed bin Salman of Saudi Arabia has recently stated that KSA can produce at least 12 million barrels per day. If it does increase output to that level, this would be a major “surprise” to world markets since its production has never exceeded 11 million. Continue reading "World Oil Supply, Demand And Price Outlook, October 2018"

O, Canada! Huge Day For Cannabis Investors

O, Canada! What a historic moment for the cannabis industry!

Canada just became the first developed country in the world to legalize recreational cannabis.

Now that legalization has set billions of dollars in motion, Cannabis Stock Trades members are in a prime position.

We've been prepping our portfolios to capitalize on this giant day and it's finally here.

Cannabis stocks have a clear history of jumping higher before and after these key legalization dates.

Let's take a look at three recent examples.

1. Cannabis stocks soared when Colorado went legal on Jan 1, 2014.

On January 1, 2014, Colorado became the first US state to legalize recreational cannabis.

It was a breakout moment for the US cannabis industry – and it sent US cannabis stocks soaring. Continue reading "O, Canada! Huge Day For Cannabis Investors"

Gold & Silver: Fly or Die

The precious metals are busy finishing the anticipated pullback to the former support, which is almost within our grasp on the short-term charts. So, let it go and in the meantime we can look into the bigger charts with higher time frames to update the outlook beyond the short-term horizon.

Chart 1. Gold Monthly: 1122/1375

Gold Shines
Chart courtesy of tradingview.com

The monthly gold chart above answers some critical questions. The first one, why gold reversed ahead of $1000? The answer is the red horizontal line, which was set at the 2008 top and acted as strong support and breakdown of it would unleash severe volatility into the market as the next level of serious technical support is located in the $700 area (2006 top/2008 bottom). Continue reading "Gold & Silver: Fly or Die"

Financials – Conspicuously Underperforming

Underperforming Despite Tailwinds

The financial cohort has conspicuously underperformed the broader market for the majority of 2018. The group didn’t participate in the broader market performance in Q3 where the S&P 500 had its best quarter since 2013. Banks have had domestic and global economic expansion tailwinds at its back while posting accelerating revenue growth, increasing dividend payouts, engaging in a record number of share buybacks and benefiting from tax reform. Augmenting this economic backdrop is a record number of IPOs, a record number of global merger and acquisitions, rising interest rates, deregulation, and tax reform. Banks are benefiting in unique ways due to the consulting fees regarding mergers and acquisitions and trading around market volatility. All of these elements provide an ideal confluence that bodes well for the financial sector. JP Morgan (JPM), Citi (C), Wells Fargo (WFC), Goldman Sachs (GS) and Bank of America (BAC) seemed to be poised to continue to benefit from the favorable economic backdrop. Thus far in 2018 the financials have performed terribly considering the broader market performance and the aforementioned economic tailwinds. There’s negative sentiment that’s placed the financials in a holding pattern for much of 2018 over concerns of rapid interest rate increases and an inverted yield curve.

The Federal Reserve, Rising Interest Rates and Economic Strength

The Federal Reserve expects the economy to continue to strengthen and inflation to rise shortly. The economic strength coupled with the threat of inflation provides an environment that’s ripe for rising interest rates. The Federal Reserve has been very bullish on the domestic front and signaled that rate hikes will continue and may even accelerate its pace of rate hikes contingent on inflation and economic strength. There’s no question that the financials benefit from rising interest rates, and Bank of America(BAC) has one of the largest deposit bases among all banks and serves as a pure play on rising interest rates. Goldman Sachs (GS) has even branched out into consumer banking with its Marcus product so needless to say all big banks will benefit from their deposit bases.

Federal Reserve Chairman Jerome Powell stated that the unemployment rate currently stands at 3.9%, near a 50-year low while core inflation is right around 2%. Powell said that these two metrics are part of a “very good” economy that boasts “a remarkably positive outlook” from forecasters. The central bank approved a quarter point hike rate in the funds rate that now stands at 2.25%, and the committee indicated that another rate hike would happen before the end of the year. 2019 will likely see three more rate hikes and 2020 will see one rate hike before pausing to assess the delicate balance of rising rates in the midst of a strong economy while taming inflation. Continue reading "Financials – Conspicuously Underperforming"

Bearish Pattern Warns Of Dollar Weakness

A unique setup has occurred in the Invesco DB US Dollar Index (UUP) that resembles an Engulfing Bearish type of pattern (even though it is not technically an Engulfing Bearish pattern). Technically, an Engulfing Bearish pattern should consist of a green candle followed by a larger red candle whereas the red candle’s body (the open to close range) completely engulfs the previous candle’s body. In the instance, we are highlighting in this article, a unique variation of what we’ll call a “Completely Filled Engulfing Bearish” pattern is setting up.

This is when two red candles set up in an Engulfing Bearish type of formation – omitting the requirement that the first candle is green. Japanese Candlesticks help us to identify the psychology of the market price in relation to our other specialized tools. We believe this formation is important because both of the red candlesticks that make up this pattern opened much higher than the previous bar’s close and dramatically sold off into the close of each session. We believe this type of rotation clearly illustrated that price is reaching resistance near $25.50 and pushing lower because of this strong resistance. We also believe this resistance/pattern will set up a downside price move in the US Dollar very soon.

bearish pattern

Below, we have highlighted the traditional formation of an Engulfing Bearish Candlestick pattern. The example chart, to the right of this definition, shows another variation of the Engulfing Bearish pattern setting up after three minor sideways candles. The interpretation of this Bearish Reversal pattern is subjective in terms of understanding the psychological representation of the Engulfing Bearish pattern. This pattern represents a total reversal of power within the price bar where the buyers were in control at the open (resulting in a higher opening price) and lost control through the trading session to allow the sellers to drive the price much lower into the close of the trading session. Thus, the Engulfing Bearish pattern represents a “key pivot point” in price that may prompt a larger downside move in the near future. Continue reading "Bearish Pattern Warns Of Dollar Weakness"