Commodity Trading: What To Watch This Week!
This is a big week for commodities…
First of all, the US Energy Information Administration (EIA) releases a highly important crude market report on Wednesday. With Middle East political violence getting worse by the day, we’ll need bearish data from the EIA to keep oil prices under control.
If not, West Texas Intermediate (WTI) could surge to new yearly highs over $109 a barrel.
But before you log into your brokerage account and buy the US Oil Fund (USO) or any other crude based ETF expecting higher prices, just remember something…
US crude supply/demand fundamentals do not support oil at $100 a barrel or higher.
So if you’re bullish of crude at these levels, be careful- you’re playing with fire.
Of course, that’s not the only important thing to watch this week…
The Federal Reserve releases the minutes of their most recent meeting on Wednesday as well. These important notes will hopefully provide insight into the Fed’s tapering plans.
As you may know, investors are waiting with bated breath for additional guidance from Ben Bernanke and the Fed. This powerful stimulus program has pushed equity markets to dizzying heights in 2013. Should the Fed start paring it back, we could see a big dose of fear enter the markets.
What’s the most likely scenario?
Well, last week’s US jobless claims number came in at the lowest level since 2007. What’s more, inflation ticked higher in July to reach the Fed’s target of 2%.
These bullish data points lend to the idea that the Fed will start tapering sooner rather than later.
However, last week’s Philadelphia Fed manufacturing survey came in surprisingly weak at 9.3. That’s much worse than last month’s reading of 19.8 and lower than the consensus estimate of 15.
With conflicting data like this, what will Ben Bernanke and the Fed do?
It’s anybody’s guess. But according to the most recent Wall Street Journal poll, 53% of economists expect tapering by the end of this quarter, while 36% expect it in Q4.
Why’s all this tapering talk so important to commodity investors?
Not only is it going to dictate the direction of stocks in the near future, commodities will certainly be affected as well. Should tapering start in September, we may see a burst of bearish action for hard assets.
But if Bernanke hints that they’ll push it out a few months, or possibly into 2014, we’ll likely see a substantial year-end boost for commodities.
Stay tuned to Commodity Trading Research for continued coverage of the hard assets markets!
Until Next Time,
Justin Bennett
Category: Commodity Trading
