We should sell Brent | 05 August 2016

Forecast for the week August 1 一 5:

XAU/USD:

In the first trading day of the week, the precious metal may demonstrate a moderate growth of quotations on the background of correction of usd. This drop is caused by weak GDP report for the second quarter. However, then the gold may get under the wave of sales because of lower expectations on inflation in the G-7 countries. The low inflation was last week mentioned by the US Fed and Bank of Japan, and earlier by EuCB officials as well as by the Bank of England. When these expectations fall, there is no need to hedge inflation risks through gold. In July oil prices noticeably dropped, which is a negative factor for the yellow metal as both contracts usually have a strong direct correlation. So, this week we should open Sell position on growth of quotations to 1355/1368 and take profit at 1339.

Brent:

According to the results of July, quotes of black gold showed a decline of 12.9% 一 the highest level in the current year. Investors are concerned with slowdown in the global economy as well as by increase in oil and gasoline production in the United States. Once again, the oilfield service company Baker Hughes reported about the increasing number of drilling rigs in the United States and Canada by 3 and 12 units, respectively. In July these numbers made totally 33 and 25. Oil companies, especially those dealing with shale gase, are increasing production capacity, as in the first half of this year, oil prices showed a steady increase. Despite the driving season, with increased demand for gasoline and smaller reserves, within the first two summer months in the United States, gasoline reserves grew by 2.83 million barrels. A year ago at this time fuel reserves fell by 3.56 million barrels. Thus, all the factors are now playing against bulls. During the short-term growth of quotations we should build up short positions. In August we will see a test of the psychological level $ 40/barrel, which implies a downward potential by 7.7%.So, this week we should open Sell position on growth of quotations to 43.65/44.60 and take profit at 41.90.

S&P500:

Very often mass media make traders concern that August trading in stock markets is very risky, as we always wintess a strong drop of prices in this period. If you look at statistics of the last 15 years, in August downtrend on S&P500 was observed in 6 cases, which makes 40% probability. It turns out that in most cases the US stock market shows a very different dynamic than the one presented by the media. What will we see in August 2016? In the first week of the month, there are certain reasons to see a smooth growth of quotations. First, many companies released better reports than it was expected in the consensus forecast in the second quarter, which is a short-term positive factor. Second, in the credit market yield of treasuries is dropping, which makes bonds less attractive. Stock and bond market usually compete for funds of investors, and low yield of bonds contributes to inflow of capital to the stock market. Third, the index of "fear" VIX closed the last trading day of July by decline 6.68%, which indicates a high "risk appetite" of investors. So, this week should open Buy positions on drop of quotations to 2161/2150 and take profit at 2180.