S&P500 History Repeats | 09 декабря 2016

XAU/USD:

Precious metal demonstrates weakness for four trading weeks in a row and, in my opinion, there should be a technical correction for two reasons. First of all, the US stock market, to which gold has a close inverse correlation, got to its historic high and now it is hard to continue further upward movement. Oil also demonstrates rapid growth of quotations (Brent + 12.7%) after Vienna OPEC summit, that promotes growth of inflationary expectations in the global economy, and this is, in its turn, positive for gold. Nevertheless, rapid growth of XAU/USD quotes is not expected today because there is FOMC meeting ahead, and investors may start selling gold again. I buy at 1170/1160 and set take profit signal at 1190.

Brent:

I expect a moderate decline of oil quotations because of general profit taking on long positions. Oil violently reacted to OPEC's decision to cut oil production to 32.5 millions barrels. Now there is euphoria on market, usually such periods do not show strong sales. However, I believe the minor correction is still possible, since the US dollar is still around its 13-year high. The US currency's influence on oil pricing is quite strong and dollar is not going to retreat yet. Now the market will pause and wait for the outcome of OPEC meeting with countries not included in the cartel. The meeting is to be held at the end of the week. I sell at 54,70/55,50 and set take profit signal at 53,10.

S&P500:

On Monday growth of quotations might be expected triggered by the ISM publication of positive data on business activity in the service sector. According to CB November data, this is suggested by a significant increase in consumer activity. This week more important news from US is not expected.
Energy stocks will continue to be in demand because of high oil prices. Will their be a Christmas rally this year? I don't think so, market is near a historic high, and given the significant growth of profitability on US Treasury bonds, investors will continue to close long positions. There was the same situation last year, when we had a rise of profitability of Treasury bonds during the first half of December, FED raised its interest rate by 0.25%, while S&P500 index declined. Will the story repeat itself this time? I think so, the chances are high. I sell at 2200/2217 and set take profit signal at 2179.