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WEEK AHEAD: OCT 11

Short Description

Will oil reach $100 per barrel?

Video Script

Hi everyone, hope you had a great weekend. I’m here as usual to help you prepare for trading in the week ahead. The biggest news in markets now is the price of oil hitting a 7-year high so will give my take on whether the price can keep rising. Also on my agenda is the start of earnings season as well as the key events in the economic calendar including Fed minutes. Stay right there.

 

So I already talked a bit about oil in the last video when previewing the OPEC meeting that happened last week. It was after OPEC that WTI crude reached $80 per barrel and a 7-year high. That’s because they didn’t decide to increase production quotas at a faster rate than already agreed. This means demand could continue to outstrip supply in the months ahead and it also serves as a powerful message that OPEC want the price of oil higher. Add the lower supply from OPEC and extra demand because of shortages in other energy products like natural gas and that’s a recipe for higher prices. Probably the two things that could nix this rally in the oil price are expectations for slower economic growth next year and that big technical resistance at 80 dollars in WTI crude. If we can hold above 80 dollars, naturally the big target that lies above is one hundred dollars per barrel.

 

OK let me switch gears to earnings season. The big US banks officially kick off Q3 earnings season this week. Let me quickly give you the release times. JP Morgan Chase reports on Wednesday the 13th. Bank of America, Wells Fargo and Citigroup all report on Thursday and Goldman Sachs reports on Friday.

 

The jitters we’ve seen in the stock market of late probably have something to do with these earnings. Interestingly bank stocks have actually been breaking higher, while the S&P 500 corrected 5%. That shows good relative strength for these stocks. I think the logic for the moves is pretty straightforward. The Fed is preparing to reduce its bond buying so investors are selling bonds, which is pushing bond yields higher. Banks should make more money when interest rates are higher. It’s a bit early for that to be reflected in these Q3 earnings but the guidance for Q4 could be drives the stock if the bank executives talk about higher rates.

 

By the way guys, if you can take a second to tap the like button for the YouTube algorithm! It really helps let more people see these videos.

 

OK let’s round off with the economic calendar. The big one as I already mentioned is the Fed minutes, but we also have US inflation and retail sales data out of the US and China. Investors took the last Fed meeting as hawkish because it looks like the Fed is on course to start tapering this year. The consensus is that they taper in November, but no date has been given by Jerome Powell or in the official statement. For that reason they minutes could be interesting to give a bit of colour on what that data is more likely to be.

 

Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.