The markets are overly optimistic | 16 December 2022

#WTI:

An outage on the largest oil pipeline to the United States from Canada could affect inventories at a key U.S. storage hub and cut crude supplies to two oil refining centers. TC Energy Keystone pipeline ferries about 600,000 barrels of Canadian crude per day to the United States. It was shut late Wednesday after a breach spewed more than 14,000 barrels of oil into a Kansas creek, making it the largest crude spill in the United States in nearly a decade. The main question continues to be the duration of the potential outage, the longer the duration, ultimately, of course means potentially tighter inventories in Cushing or heavy on the Gulf Coast. If the outage last for more than 10 days, it could push Cushing storage to near the operational minimum of 20 million barrels.

Trading recommendation: buy 70.00 and take profit 76.50.

#SP500:

Over the past six weeks or so, U.S. mortgage rates have fallen, stock prices are up, and yields on corporate debt have dropped, all signs that financial conditions are easing even as the Federal Reserve continues to wage war on 40-year-high inflation. But unlike this past summer, when Fed Chair Jerome Powell pushed back hard in the face of a similar set of market moves, U.S. central bankers may this time be mostly okay with it. The Fed this week is expected to slow what's been a blistering pace of interest rate increases this year, with Powell telegraphing a half-of-a-percentage point increase in the policy rate, to a range of 4.25%-4.5%.This is a positive signal for the stock market.

Trading recommendation: buy 3890 and take profit 4070.

XAUUSD:

The Fed this week is expected to slow what's been a blistering pace of interest rate increases this year, with Powell telegraphing a half-of-a-percentage point increase in the policy rate, to a range of 4.25%-4.5%. The Fed raised rates by 75 basis points at each of its last four meetings as it sought to lift borrowing costs high enough to bite into economic growth. Anticipation that December's smaller rate hike means the Fed is closer to ending rate hikes altogether, along with data showing inflation may be cooling and remarks from Powell that he and his colleagues "do not want to overtighten," has fueled the recent easing in financial conditions.

Trading recommendation: buy 1770 and take profit 1814.