Forecast for the week of April 17-21:
Over the last 6 trading weeks precious metal shows quotes rise, and we believe it's time for technical correction. Gold was in demand due to geopolitical tension in Syria. Now Syria situation has receded into the background. It is appears to be temporary calm before the storm. Syria issue is not solved yet and nobody knows who will be involved in the process. Syria provides more questions than answers. Considering that USA, China and Eurozone March inflation reports showed decline of CPI rate, we will expect investors to take profit on long positions. Gold is heavily dependent on inflationary expectations of world's largest economies, first of all US economy. Inflation drop is a bad signal for gold. Trading recommendation: Sell 1287/1300 and take profit 1255.
At the end of previous trading week oil showed downside correction, and we believe it will be continued this week. The main driver of oil price drop is increasing volumes of oil output in US. Oil output is increasing for 8 trading weeks in a row. Based on weekly reports of oilfield service company Baker Hughes, we will expect increase in productive capacities. Now total number of oil rigs in US is at its highest since May 1, 2015.
On April 12 US Department of Energy indicated in its report that in 2017 US oil output will increase by 0.68 million barrels. We believe, this factor may be considered as correctional, not as reversal. It may be enough to trigger correction towards 54,00/52,00, but for more sufficient drop we will need OPEC to refuse to extend its agreement of oil output reduction. Yet none of world's leading power producers have made such an announcement. Trading recommendation: Sell 55,70/57,00 and take profit 54,10.
Corporate reporting season in US has started with positive news, however, week trades finished with quotes drop. JPMorgan Chase and Citigroup reported rise in net income by 22.2% and 22.7% in annual terms. Two-digit growth rates are generally received positively by the market but this time bank shares showed only short-term quotes rise. However, it's worth to admit that it was an impressive rise – approximately 2% just over an hour of trades. This week there will be the following important reports: Bank of America, IBM, Visa, Goldman Sachs. We will expect positive reports considering accelerating economic growth in the first quarter. That may trigger share quotes rise. We also will expect flat on S&P500 index, as VIX is rising. Due to all above said, this week it's better to trade on shares, not on index. Trading recommendation: flat within 2310 -2370.