Sell the rumor, buy the fact  | 22 4月 2016

The forecast for the week 18 - 25 of April:

XAU/USD:

The coming week is going to form a mixed background. On the one hand, reduced "appetite for risk", is usually a positive factor for the precious metal. In the first quarter, China's GDP grew by 6.7% y/y. Figures are still high as compared to most countries, but in the first quarter of 2015 it was 7% y/y. We also cannot ignore the weak data on manufacturing production in the USA: decline of 0.6% was recorded in March. In general, for the first quarter, the manufacturing sector dipped by 0.6% and that in view of low base of the fourth quarter of 2015. The volume of manufacturing production in the United States has declining for the two quarters in a row: for this period decline is 1.79%. Such factors can cool enthusiasm of investors, who bought "risky assets" actively the last week. On the other hand, low expectations on inflation in the G-7 countries is a negative factor for gold. We can not ignore a possible decline of oil prices after announcement of the results of Doha's meeting, which also plays into the hands of "bears". Therefore, this week we should expect the flat within the range of 1208 -1260.

BRENT:

“Sell the rumor, buy the fact!” – that's the rule of exchange we are going to use the coming week. Starting from January 20, quotations of the "black gold" rose on expectations about freeze of production from the world's leading producers of energy. During this period, oil had grown by 55%. There was another driver for growth of quotations - reluctance of the US Federal Reserve to tighten its monetary policy in the first quarter. Raise of the interest rate contributes to strengthening of the US dollar, which in turn puts the oil under a downward pressure. In this regard, FOMC also helped "bulls" to drive the price. In my opinion, freeze factor is already included in the current prices of oil and now it can turn to technical correction. Moreover, the last week, USA reported about increase of crude oil reserves by 6.63 million barrels once again, against reduction of 4.93 million. barrels recorded the week before. So, the two weeks of April recorded a surplus of oil in the volume $ 1.7 million barrels. Now I am in favor of development of a technical correction. Friday's release of the Baker Hughes oil services company pointed at reduction of the number of drilling rigs in the United States by 3 units and increase of those in Canada by 2 units. The week before a decrease by 8 and 3 units, respectively, was recorded. The pace of reduction of the number of drilling rigs in the US has slowed down, and the Canadian oil industry believe that the current level of prices of raw materials is cost efficient for business. Thus, "bulls" can not bank on this report. So far, we cannot talk about reversal of the medium-term uptrend, as investors may again take a lead from FED's reluctance to raise the interest rate on the meeting scheduled for 27 April. Therefore, this week we should open Sell positions on growth of quotations in the area of ​​43.00/45.00 and take profit around 40.50.

S&P500:

The first week of season of corporate reports, was closed by the US stock market with a steady growth. Shares of the banking sector turned out to be above the consensus forecast and obviosly were the market leaders. By the end of last week, the financial sector added 6.08% with growth of S&P500 by 1.62%. The US report on inflatio for March also played into the hands of "bulls": that month growth of CPI was 0.9% y/y, whereas the market expected 1.1% y/y. Low expectations on inflation usually encourage the stock market. However, now I would not join optimists for the two reasons. First, though leading US financial institutions, reported better than was expected by the median line of forecasts, still they had reported a decrease in revenue and net profit. In this context, growth of stock prices may be short-term and speculative. To reach sustainable growth, increase of the quarterly profit is required, which we had not seen. Firstly, the coming week more corporate reports will be published and the list includes the companies that are highly dependent on consumer spending: J&J, Philip Morris, American Express, Coca-Cola, American Airlines, McDonald's. Taking into account negative reports on US retail sales for the first quarter, corporates may disappoint investors by weak data. Therefore, this week we should open Sell positions on growth of quotations in the area of 2083/2103 and take profit around 2038.