Oil
Crude light oil has touched $51 after holding above $43. This level was called in a previous article here. I prefer to long the Crude light oil because it’s stronger than the Brent.
Clearly in an uptrend on the daily charts. I think we will see a retracement into the $46 area before a push further to cover the gap around $56.
Brexit
What’s the big hooha going on about Brexit? And where’s the trading opportunity? Take a look at this great little video below, just 1 minute and you’ll understand what the Brexit is and its implications.
[youtube http://www.youtube.com/watch?v=Nz-bTWNmrUk&w=560&h=315]
The opportunity here is in currencies. If you’re a day trader, the volatility in the GBP is giving many trading opportunities because of the brexit issue. The referendum is on 23rd of June just so you know. My gut feel is that we’re going to see a drop in the GBP regardless of the news. And if there is a brexit, look for the trends which follow on the GBP. Also the USD and JPY and gold for some safe haven play if indeed there is a brexit..
US Markets
Fed is highly unlikely to be raising interest rates in June, but still expecting 1 rate hike some time this year.
My view has always been that a huge economy has huge inertia, it’s difficult to steer, and like a commercial aircraft, you don’t want to jerk the controls, you want to shift the controls gently. I think this is what the Fed has been doing, they have been shifting their stance from raising rates twice this year, to delaying the first hike, to now likely only 1 hike this year. I won’t be surprised if we get no hike at all this year, and maybe drop back to 0% interest rates even. The reason for that is the next opportunity to watch out for.
The basic premise is that US will not be spared from a global slowdown. Then suddenly we’re hearing some people getting bearish on the news. For example, we got Goldman Sachs calling high risk of a large sell off in US markets. Then we got George Soros going back to work at the office, actively trading again because of his bearish views on the US markets. While I hold this view that we are going to see a drop, the “when” and “how” are starting to become more uncertain. If everyone on the street believes the US market will drop, will it really? Initially I thought we would see a trade up above the 2140s on S&P500 for a major short squeeze before a steep drop. But now that scenario is becoming less likely. Will it make an even higher move to kick out the weak shorts then drop? Or will it be forming a nice top before a drop? Or will it just continue this uptrend for a period till the news casters turn bullish before it actually drops?
The opportunity could be in looking for shorts on the US indices, or taking a long on the VIX because a lot of volatility is expected.
Seasonal trades
Commodities are known for their cyclical nature. Largely because of harvest season for the commodities, creating cyclical fundamental demand and supply scenarios. Let’s not forget that the commodities futures market is a hedging tool for the commodity producers, they are the ones with genuine buying and selling interests. So taking seasonal trades on commodities can be a very good strategy as well. Here we look at some seasonals of more familiar instruments.
USD tends to form a high in mid June and fall into the start of August
EUR forms low in mid June, tendency to rally into start of August
Idea: Bullish bias on the EURUSD from mid June until late July. Look for swing trade setups with a long bias.
GBP rally into August
Idea: Also bullish bias on GBPUSD from mid June into late July. Look for bullish technical swing setups as well.
Oil bullish to july
Idea: Corresponds with our view about oil’s uptrend continuing to $56 after a retracement.
Another bonus seasonal tit bit which I uncovered, is an interesting seasonal trade of shorting the EURAUD from 2nd June to 19th June.
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