Don Dawson
Online Trading Academy
We have all been watching this Stock market Bull run since the 2009 lows were in place. And of course that means many pundits have been trying to pick when it will end. Unfortunately for them and great for us, they have been wrong as usual. Oh, why is it good for us? If they are selling into this rally they will be providing liquidity for us trend followers. But eventually the Stock Market will run out of buyers and then there will be more sell market orders than buy market orders and the market will correct. When? Who knows!! Our charts will tell us when the trend changes and we can then sell into the bear market rallies.
While the Federal Reserve’s Quantitative Easing policy helped to provide liquidity to the markets during this bull market it also provided capital for international and domestic infrastructure to be built. To have the ability to build this the world needed energy products, namely Crude Oil.
There are two primary oil markets in the world – Brent Crude Oil and West Texas Intermediate Oil (WTI). Brent is a product of the North Sea and is traded on the Inter-continental Exchange (ICE) and West Texas Intermediate is a product of North America mainly Cushing, Oklahoma and trades on the Chicago Mercantile Group Exchange (CME).
Brent has been the benchmark of the oil markets for many years. Brent is a better quality of oil and requires less refining than WTI. Over the last 4 years the Spread has been as wide as $23 premium to Brent. Today it is back to a more normal parity. When a market can carry a premium like the Brent did to other oil products you know it is in high demand around the world.
Energy products are in such high demand around the world all year long and this is during normal times. But imagine when there is extra demand? What do you think that does to the price structure of energy products? Or what would happen if there was all of a sudden lack of demand?
To measure this demand we can follow the price structure of these products by looking for contango and backwardation in their prices.
Table 1 is an example of the price structure of both WTI and Brent on the day this article was written.
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Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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