Attractive levels on BRENT | 08 April 2016

Forecast for the week April 4 - April 8:

XAU/USD:

In my opinion, growth of quotations should be used to build short positions. Now we have no positive news for this metal. First, based on results of the past week, yield on 10-years' US bonds, which is closely linked to XAU/USD dropped by 0.14% to its lowest level in the last month. Second, "appetite for risk" of the financial markets is still shrinking, which is also a negative factor for gold, because it is taken by investors as a "safe asset". Positive economic data from the United States reassured bulls to open long positions on the US stock market: S&P500 finished the week by growth 1.81% and the NASDAQ Composite added 2.95%. Investors are willing to take risks and are actively buying securities with high P/E multiplier. So, this week we should open Sell positions on growth of quotations to 1229/1245 and take profit at the level of 1212.

BRENT:

The last two trading weeks oil finished in the "red area" and markets started to discuss inevitable sales of "black gold" again. In my view, sales will take place, not now, but after April 17, when the world's leading oil producers will run the meeting in Qatar. The well-known stock exchange rule can work: buy on rumor - sell on facts. The summit in Doha will be held in less than two weeks, so this period should be used to open long positions. Current levels are attractive to build "long" trades. First, the oil service company Baker Hughes reiterated decline of number of the US drilling rigs by 10 units. Despite the fact that from 20 January to 1 April oil quotations had grown by 40%, the number of drilling rigs drops rapidly. Secondly, for the last two weeks, the Cushing terminal in Oklahoma has been showing a decrease of the crude oil reserves (1.53 million barrels). This is also a positive factor for the market, as this indicator is one of the advance indicators of oil demand in the entire country. So, this week we should open Buy positions on drop of quotations to 38.00/36.50 and take profit at 40.00.

S&P500:

On April 11 a new corporate reporting season starts, and most investors expect a drop of the revenue and net profit of leading US corporations. However, S&P500 index is now at the highest level since December 31 of 2015. 3.1% is left to reach the historical peak. I have the impression that investors tend to drive the market to a new High and then to arrange a mass sale of their assets. Despite the fact that we observe bullish sentiment in the stock market, the medium-term positioning of investors indicates surge of the share of "protective" assets. Anegative environment begins to form for the stock market On the one hand, there is drop of the net corporate profit caused by revaluation of the national currency and demand reduction. On the other hand, Friday's release on the labor market shows growth of inflation expectations, which will make the US Federal Reserve raise the interest rate in the summer or fall. The coming week will not as less eventful in terms of important macroeconomic statistics. We should only pay attention to the report by the ISM made for the service sector. Economists at investment banks surveyed by Bloomberg expect growth of PMI index. Positive statistics of the last trading week allow us to sharethis opinion. In my opinion, in the first half of the week, we still can expect a moderate growth to ​​the psychological level 2100. Then investors may begin to record profit, and we will see a downward rollback of quotations. Purchases are quite dangerous now, because the price is very high. Also it is too early to sell, it is better to wait until the first corporate releases are published. So, this week we should expect the flat within the range of 2040 -2100.