The week began with a mini rally in equity markets due to reports that top officials from Russia, Qatar, Venezuela and most importantly Saudi Arabia, had agreed in principle to freeze oil output at the level achieved in January. The meeting had resulted from the financial hardship, that was being caused by crude dipping to prices not seen since 2003. This was causing investors to abandon oil in droves.
The two biggest producers are Saudi Arabia and Russia, with daily oil output at 10.2 million barrels and 10.9 million barrels respectively. Although peak production for the Saudis was hit last June at 10.5 million barrels, Russia has reached a high not seen since the breakup of the Soviet Union in 1991.
As a result of the agreement, global oil prices surged by nearly 6% on the news. Later they would fall back somewhat, on the realization that the understanding had limited impact on global supplies, which were still in excess of 1.5 million barrels a day.
Doha, capital of Qatar, site of recent oil meeting to freeze production.
Later in the week, the Iranians indicated their willingness to work collaboratively in an effort to reduce the global glut in crude. It would be the first real accord on oil output in 15 years. World oil prices spiked on the news, but since there is no formal agreement prices drifted down once again.
The week ended with American priced oil WTI (West Texas Intermediate) at below $30.00 USD (United States Dollar), down nearly 5% today. International priced Brent is down nearly 4%, at just below $33.00 USD.
It is unlikely that Iran would agree to a freeze anyway, since they will want to increase exports of crude. Their production has been hampered by international sanctions, that were finally lifted just last month. They are likely to increase output, by hundreds of thousand of barrels a day, later this year. It will add to the global glut in crude, with world inventories already at a record high.
In related news Standard & Poor an American based credit agency, is in the process of downgrading a number of oil producing nations in the Middle East. It is the second such cut in a year. The reason is these crude exporters, are spending down their sovereign wealth funds at an accelerated rate.
Closed on Monday, United States markets were in a mini rally Tuesday and Wednesday and futures were still up Thursday morning. It would have been the first time that the indexes would advance for four days in a row since October. However, the market then flat-lined and went into negative territory. This morning’s futures were also down.
The Dow Jones Industrials were up by over 6% on Wednesday from the lows seen last Thursday. The composite is still down over 4% in 2016.
New York Stock Exchange
What caused the short lived rally in the United States (U.S.) stock markets? In addition to the spike in oil, there was a release of some positive industrial production data and once again an indication that the U.S. Federal Reserve (Fed), is even less less likely to raise interest rates this year.
In fact, according to the St. Louis Fed President it would be unwise for the central bank to raise interest rates further this year. His opinion is based on the declining rate of inflation expectations in the United States and the increasing global market volatility.
Gold continued to retreat in price at the beginning of the week, after hitting a one year high of $1260.60 USD last Thursday. However, although the metal would decline and increase throughout the week, it seems to have settled well above a key benchmark of $1200.00 USD. On Friday morning it listed for $1233.20 USD.
Canada’s Maple leaf 1 troy ounce silver bullion coin.
Silver also seemed to be locking in gains. The price level is now up over 13% for 2016. It opened Friday morning at $15.51 USD an ounce, well above the $15.00 level. The next psychological barrier would be $16.00 USD.
The Bank of Japan (BOJ) put in place official negative interest rates on Tuesday. The benchmark is now at -0.01%. The move is an effort to get businesses to boost investment and spending.
Many analysts are skeptical that it will finally achieve what all other initiatives have tried to do, that is return the Japanese economy to growth. The county possesses the third largest global economy.
As evidence of this, annual exports from Japan fell to their lowest level in January since the financial crisis of 2008. The outflow of goods has dropped 12.9% year to year, as demand from China and other nations has plummeted. It does not bode well, to a quick exit from recession for the Japanese economy.
More experts are now in agreement that Japan needs major structural reforms in addition, to the massive amounts of stimulus and now negative rates of interest. It is a clear indication that monetary and fiscal policy are reaching their limits, as a tool for growth in Japan.
The Chinese government is also warning about asset bubbles and the additional downward pressure on the yuan, if monetary policies become too loose. The People’s Bank of China (POC) is instead trying to use alternative measures to keep the financial markets liquid. One is the use of short term loans, whenever there is a critical need for more funds.
Tensions between the United States and Russia continue to rise, especially over the divergence of goals regarding Syria. The latest bone of contention is over the shopping list that Iran is presenting for military hardware, which includes the advanced aircraft known as the Sukhoi-30 fighter jets.
Russia is already in the process of delivering the modern S-300 air defense missile system to Iran. The Prime Minister of Russia has already introduced the idea of a new Cold War between the West and his country last weekend.
Antagonisms are also rising between China and the United States. It became public that the Chinese have recently deployed an advanced surface to air missile system, on one of the disputed islands under its control in the South China Sea.
It comes after reassurance that it would not militarize the region. It comes on the heels of a massive island building program, that permitted the construction of airstrips.
News of the placement arrived just as the leaders of ASEAN (Association of Southeast Asian Nations) had concluded a meeting, hosted by the American President Obama in California. The policy statement issued by the group was that all territorial disputes in the South China Sea, should be resolved through legal means and not by military force.
ASEAN Countries
In Latin America, the government of Venezuela is finally taking action on the collapsing domestic economy. There has now been a 37% devaluation in the currency. In addition, the country has finally raised the price of gasoline, on what is deemed to be the world’s cheapest.
It is unlikely these measures will be enough to combat a devastating recession, that is accompanied by runaway inflation and widespread shortages of basic consumer goods.
Also in the region, U.S. President Barrack Obama is scheduling an official state visit to the island of Cuba. It will be the first time since 1928, that a sitting American president will arrive for formal talks.
There is already negotiations underway, to end the 54 year embargo on commercial relations between the two countries. It includes normal air passenger travel to Cuba from the United States.
Flag of European Union
This week also saw the United Kingdom begin negotiations in keeping the country in the European Union. A referendum is expected in June of this year. Prime Minister Cameron is focusing on 4 issues of concern to British voters.
The main one at the moment of course, is the refugee crisis in Europe which voters want to have addressed. There is a plurality of the electorate, asking for curbs on migration from the mainland.
Two major stumbling blocks for the other nations of the Eurozone in making an agreement with the United Kingdom, are curbs on welfare and financial regulation.
The Investment Newsletter had 0 target fills to report this week, and 2 stocks targets called early.
Lufthansa had been recommended long on 03/30/15 for $14.29 USD. There was a Short Term Target fill on 12/28/15 at $15.89. The $1.60 advance in the share price, provided a return of 11.20%.
Given current global market conditions especially in Europe, it is suggested that investors liquidate the two remaining positions of this stock at this time.
Lufthansa (DLAKY) was recommended long on 03/30/15 for $14.29 USD. It is now suggested that investors sell this stock before reaching the Medium Term Target. At $15.01 USD, the gain of $0.72 will provide investors a return of 5.04%.
Lufthansa (DLAKY) was recommended long on 03/30/15 for $14.29 USD. It is now suggested that investors sell this stock before reaching the Long Term Target. At $15.01 USD, the gain of $0.72 will provide investors a return of 5.04%.
Stock Fills For The Previous Weeks
Feb 12, 2016 ———05 Target Fills
Feb 05, 2016 ———05 Target Fills & 4 Early Stock Calls
Jan 29, 2016 ———01 Target Fills & 2 Early Stock Calls
Jan 22, 2016——— 08 Target Fills
Jan 15, 2016 ———09 Target Fills
Jan 07, 2016 ——– 10 Target Fills
Dec 31, 2015 ——–1 Target Fill
Dec 24, 2015 ——–0 Target Fills
Dec 18, 2015 ——–4 Target Fills
Dec 11, 2015 ——–2 Target Fills
Dec 04, 2015 ——–4 Target Fills
Nov 27, 2015 ——- 1 Target Fill
Nov 20, 2015 ——- 6 Target Fills
Nov 13, 2015 ——–6 Target Fills
Nov 06, 2015———5 Target Fills
Oct 30, 2015——— 2 Target Fills
Oct 23, 2015 ——– 2 Target Fills
Oct 16, 2015 ——– 2 Target Fills
Oct 09, 2015 ——- 1 Target Fill
Oct 02, 2015 ——–5 Target Fills
Sept 25, 2015 ——-1 Target Fill
Sept 18, 2015 —— 2 Target Fills
Sept 11, 2015 —— 1 Target Fill
Sept 04, 2015—— 2 Target Fills
August 28, 2015 6 Target Fills
August 21, 2015 – 2 Target Fills
August 14, 2015 –-1 Target Fill
August 07,2015 —2 Target Fills
July 31, 2015 ——1 Target Fill
July 24, 2015 ——1 Target Fill
July 17, 2015——-3 Target Fills
July 10, 2015—— 1 Target Fill
July 03, 2015—— 0 Target Fills
June 26, 2015—– 3 Target Fills
June 19, 2015 —- 2 Target Fills
June 12, 2015—–2 Target Fills
June 05, 2015—–4 Target Fills
May 29, 2015 —- 5 Target Fills
May 22, 2015—– 2 Target Fills
May 15, 2015 —–2 Target Fills
May 08, 2015 —–1 Target Fill
May 01, 2015 —- 3 Target Fills
April 24, 2015—- 2 Target Fills
April 17, 2015 —-5 Target Fills
April 10, 2015 —-3 Target Fills
@ 2014 The Day Trading Academy. All rights reserved. This work is based on SEC filings, interviews, corporate press releases, and extensive research done across investment articles, current events, and investment expertise. It may contain errors, and you shouldn’t make any financial decision based solely on what you read here. It’s your money and your responsibility. As with any investment, there is no guarantee against potential loss. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. This publication’s sole intended purpose is to provide investment-related information as well as education and opinions to subscribers and the recommendations and analysis presented to members is for the exclusive use of members.