Stock Pick Update: Dec. 16 – Dec. 22, 2020

In the last five trading days (December 9 – December 15) the broad stock market has been trading within a short-term consolidation following its recent record-breaking run-up. The S&P 500 index has reached new record high of 3,712.39 a week ago on Wednesday. Then it retraced some of the advance before going back up on Monday-Tuesday this week.

The S&P 500 index has lost 0.31% between December 9 open and December 15 close. In the same period of time our five long and five short stock picks have gained 1.32%. Stock picks were relatively much stronger than the broad stock market last week. Our long stock picks have gained 0.91% and short stock picks have resulted in a gain of 1.73%. So short stock picks’ performance outpaced the benchmark return on the downside.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 9 open – December 15 close % change): XOM (+0.77%), EOG (+0.62%), PGR (+4.73%), BK (+0.51%), MMM (-2.10%)
Short Picks (December 9 open – December 15 close % change): LNT (-0.81%), CNP (-1.64%), ABBV (-4.28%), DHR (-0.16%), APTV (-1.75%)

Average long result: +0.91%, average short result: +1.73%
Total profit (average): +1.32%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 16 – Tuesday, December 22 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 16) and sold or bought back on the closing of the next Tuesday’s trading session (December 22).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Energy, 2 x Financials, 1 x Communication Services
  • sells: 2 x Utilities, 2 x Real Estate, 1 x Consumer Staples

Buy Candidates

XOM Exxon Mobil Corp. – Energy

  • Stock broke above its short-term downward trend line, uptrend continuation play
  • The support level is at $40 and resistance level is at $44-47 (short-term target profit level)

COP ConocoPhillips – Energy

  • Possible short-term bull flag pattern, uptrend continuation play
  • The support level is at $42 and resistance level is at $45-50

WFC Wells Fargo & Co. – Financials

  • Possible short-term bull flag pattern – uptrend continuation play
  • The support level is at $29.50 and resistance level is at $30.00

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Energy and Financials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Stock Pick Update: Dec. 9 – Dec. 15, 2020

In the last five trading days (December 2 – December 8) the broad stock market has further extended its long-term uptrend. The S&P 500 index reached new record high of 3,708.45 yesterday. The S&P 500 index has gained 1.33% between December 2 open and December 8 close. In the same period of time our five long and five short stock picks have lost 0.23%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 1.30%, but short stock picks have resulted in a loss of 1.76%. So long stock picks’ performance closely followed the benchmark.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 2 open – December 8 close % change): WMB (+6.00%), COG (-4.53%), PGR (+3.21%), CB (+0.51%), MMM (+1.29%)

Short Picks (December 2 open – December 8 close % change): NEE (-0.62%), EXC (+0.49%), SPG (+7.62%), WELL (+3.69%), WMT (-2.36%)

Average long result: +1.30%, average short result: -1.76%

Total profit (average): -0.23%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 9 – Tuesday, December 15 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 9) and sold or bought back on the closing of the next Tuesday’s trading session (December 15).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Energy, 2 x Financials, 1 x Industrials
  • sells: 2 x Utilities, 2 x Health Care, 1 x Consumer Discretionary

Buy Candidates

XOM Exxon Mobil Corp. – Energy

  • Stock broke above its short-term downward trend line, uptrend continuation play
  • The support level is at $40 and resistance level is at $44 (short-term target profit level)

EOG EOG Resources, Inc. – Energy

  • Possible short-term bull flag pattern, uptrend continuation play
  • The support level is at $47 and resistance level is at $54

PGR Progressive Corp. – Financials

  • Stock broke above its short-term downward trend line
  • The support level is at $86 and resistance level $98-100

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Energy and Financials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

3 Stocks for Investors Chasing High Paying Dividends

Interest rates were already near historic lows before the COVID-19 pandemic and look like remaining that way for the foreseeable future as the Federal Reserve encourages more borrowing to stimulate the economy. As an alternative to keeping cash squirreled away in a low-interest saving account or government bond, investors can chase a higher return on their money by purchasing high paying dividend stocks.

Bear in mind, companies can slash or reduce their dividend at any time. For example, the major airline stocks pulled their dividends earlier this year amid the uncertainty surrounding travel during the health crisis. In saying that, let’s take a closer look at the three stocks in the S&P 500 that each offer a dividend of over 7%. Currently, the average stock in the index yields 1.8%.

Exxon Mobil Corporation

With headquarters in Irving, Texas, Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas. The global energy giant has increased its annual dividend for 33 consecutive years at an average of 3.53% each year. Investors currently receive a healthy forward dividend yield of 8.29%.

As of Nov. 26, 2020, the stock has a market capitalization of $172.55 billion and trades around 25% higher over the past month. From a chart perspective, a recent breakout above a 10-month downtrend line may trigger a retest of the early June swing high at $55.36.

Altria Group, Inc.

Altria Group, Inc. (MO) manufactures and sells cigarettes, smokeless products, and wine in the United States. Although not everyone’s cup of tea, the cigarette maker issues a smoking hot annual dividend of $3.44 per share, equaling an 8.52% yield. Furthermore, the company’s dividend has increased by an average of 11.75% annually for the past 11 straight years.

Altria shares have a market value of $75 billion and trade up a modest 3.33% over the last month as of Nov. 26, 2020. Technically, the price continues to find resistance from the top trendline of a descending channel that may see a decline to the pattern’s opposing side at $35.75.

AT&T Inc.

AT&T Inc. (T) provides telecommunication, media, and technology services through four segments: Communications, WarnerMedia, Latin America, and Xandr. The $206.58 billion communications titan pays a $2.08 dividend per share, with a yield of 7.17%. Impressively, the 37-year-old Dallas-based company has raised its dividend by an average of 2.04% each year for the past 36 consecutive years.

As of Nov. 26, 2020, AT&T stock has gained 4.21% over the last month, outperforming the telecommunications sector average by about 1%. Chart wise, the shares have consolidated since breaking above a multi-month downtrend line earlier this month. A breakout from this level could spark a rally to the June swing high at $33.24.

For a look at today’s earnings schedule, check out our earnings calendar.

AstraZeneca’s Vaccine Trial Results Boost Markets

AstraZeneca Reported Encouraging Trial Results But Its Stock Is Set To Open Lower

AstraZeneca has just reported that its COVID-19 vaccine had efficacy of up to 90%.

The company tested two dosing regimens. The first one, which showed efficacy of 90%, included a half dose of the vaccine followed by a full dose a month later. Interestingly, the second regimen, which included two full doses separated by a month, showed efficacy of just 62%.

AstraZeneca’s shares are down by more than 1% in premarket trading as traders focused on the headline efficacy rate of 70% which included results of both dosing regimens.

However, the world has just received another COVID-19 vaccine, and the markets can’t ignore it. S&P 500 futures are gaining more than 0.5% in premarket trading as traders believe that mass vaccination will soon provide huge support to the economy.

PMI Reports Indicate That The Services Segment Is Under Pressure

Soon after the market open, traders will have a chance to evaluate flash PMI reports for November. U.S. Manufacturing PMI is projected to decline from 53.4 to 53, while Services PMI is expected to decrease from 56.9 to 55. Numbers above 50 show expansion so PMI reports are projected to show that the economic recovery continues at a healthy pace.

PMI reports from other countries, which were released earlier today, indicated that services were hit hard by the second wave of the virus.

In the UK, Services PMI declined from 51.4 in October to 45.8 in November but remained well above the analyst consensus of 42.5. Meanwhile, Euro Area Services PMI declined from 46.9 to 41.3 compared to analyst consensus of 42.5.

The current analyst estimate for U.S. Services PMI looks rather optimistic, and it remains to be seen whether the services segment managed to continue its recovery at a healthy pace despite the second wave of the virus.

Oil Tries To Settle Above The $43 Level

Not surprisingly, positive vaccine news provided material support to the oil market, and oil made an attempt to settle above the $43 level.

Meanwhile, energy-related stocks are ready to continue their rebound. Shares of major oil companies like Exxon Mobil and Chevron are already gaining ground in premarket trading.

Back in August, oil’s upside move was stopped at $43.75, and oil is slowly climbing towards this important level. If oil manages to get above $43.75, oil-related equities will likely experience a major boost.

For a look at all of today’s economic events, check out our economic calendar.

Exxon Mobil Posts Third Straight Loss in Q3 as COVID-19 Pandemic Hurts Demand; Target Price $23 in Worst Case

Exxon Mobil, an American multinational oil and gas entity, reported a loss for the third consecutive time in Q3 2020 as the oil and gas company continues to struggle from the COVID-19 pandemic-driven slowdown, sending its shares down over 2% on Friday.

The U.S. largest publicly traded oil company reported third-quarter 2020 loss of $680 million, or $0.15 per share assuming dilution. Third-quarter capital and exploration expenditures were $4.1 billion, bringing year-to-date spending to $16.6 billion, more than $6 billion lower than the prior-year period.

Exxon Mobil posted an adjusted loss of 18 cents per share, better than market expectations of a loss of 25 cents per share.

“Exxon Mobil introduced preliminary 2021 capex of $17.5 billion at the midpoint, in-line with Consensus. Exxon Mobil reaffirmed it is planning to fund the dividend without increasing gross debt,” said Jason Gabelman, equity analyst at Cowen and Company.

“We estimate Exxon Mobil ’21 CF will be $5 billion short of covering the dividend; stock performance today could be dictated by other levers to cover that funding gap. 3Q20 earnings beat consensus, though CFO was below the forecast,” Gabelman added.

At the time of writing, Exxon Mobil shares traded 2.48% lower at $32.15 on Friday; the stock is down about 50% so far this year.

Executive Comments

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Darren W. Woods, chairman and chief executive officer.

“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle.”

Exxon Mobil Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $43.00 with a high forecast of $55.00 and a low forecast of $33.00. The average price target represents a 32.84% increase from the last price of $32.37. From those nine analysts, two rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $44 with a high of $85 under a bull-case scenario and $23 under the worst-case scenario. The firm currently has an “equal-weight” rating on the oil and gas company’s stock. Goldman Sachs Group upgraded shares of Exxon Mobil to a “neutral” rating from a “sell” and lifted their stock price forecast for the company to $36 from $33.

Several other analysts have also recently commented on the stock. Scotiabank upgraded shares of Exxon Mobil to a “sector perform” rating from a “sector underperform” and set a $45 price target on the stock. Credit Suisse Group started coverage and set a “hold” rating and a $47 price target on the stock. At last, Truist lowered their price objective to $41 from $44 and set a “hold” rating on the stock.

Analyst Comments

“Attractive investment opportunities, but above average execution risk. Exxon Mobil (XOM) reduced its 20/21 capex plans, deferring but not abandoning its counter-cyclical growth strategy. Capex ultimately needs to move higher to stabilize the business, and while XOM does have high-quality investment opportunities, funding the capital program and the dividend will strain the balance sheet absent higher commodity prices, making dividend sustainability a lingering risk,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

“High capex limits FCF. Higher spending and more exposure than peers to current downstream & chemicals margin weakness lead to lower FCF yield. Earnings growth targets appear hard to achieve with current downstream & chemicals margins,” McDermott added.

Upside and Downside Risks

Upside: 1) Higher commodity prices, including liquefied natural gas (LNG). 2) Successful execution of major capital projects. 3) Permian well performance improvements- highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost overruns on major capital projects. 3) Service cost inflation in the Permian erodes returns. 4) Geopolitical risk could impact production volumes and/or returns; Guyana is a particular focus now.

Check out FX Empire’s earnings calendar

U.S. Stocks Set To Open Lower As Tech Stocks Slide After Earnings Reports

Big Tech Stocks Are Losing Ground In Premarket Trading

S&P 500 futures are losing ground in premarket trading as leading tech stocks are under pressure after the release of third-quarter earnings reports.

Shares of Apple, Microsoft, Facebook and Amazon are losing ground in premarket trading, while shares of Alphabet are gaining more than 6% due to healthy growth of Google’s ad sales.

Elevated expectations are the biggest problem for tech stocks right now. For example, Apple shares are up by 57% year-to-date while Amazon stock gained almost 74% since the beginning of the year.

In this situation, it is not enough to simply beat analyst estimates on both earnings and revenue – the market wants to see a path for robust growth in the future. That said, it remains to be see whether the current premarket sell-off will  turn into a serious multi-day pressure on tech stocks as many traders are waiting for a pullback to initiate their positions in market leaders.

Oil Fails To Rebound As Coronavirus Continues To Surge

Oil remains under pressure after yesterday’s sell-off as traders evaluate risks of additional lockdowns. Yesterday, U.S. recorded more than 91,000 new cases of the disease, so coronavirus will likely get back to the headlines right after the U.S. presidential election.

Meanwhile, Exxon Mobil reported its third-quarter results, missing analyst estimates on revenue and beating them on earnings. Chevron also beat earnings estimates but failed to live up to revenue expectations.

This trading session is set to be chalelnging for oil majors as their revenues were hit hard by the pandemic while oil is trading near the $36 level amid virus fears.

Personal Spending Increased By 1.4% In September

U.S. has just provided Personal Income and Personal Spending reports. Personal Income increased by 0.9% month-over-month in September compared to analyst estimates which called for growth of 0.4%. Personal Spending grew by 1.4% compared to analyst consensus of 1%.

Both reports were better than expected and can provide some support to stocks during today’s trading session. The strength of Personal Spending is especially welcome as it shows that consumers remained confident in September.

For a look at all of today’s economic events, check out our economic calendar.

Exxon Mobil Expects Bigger Q3 Loss, But Recovery in Chemicals Industry Would Benefit; Target Price $43

Exxon Mobil Corp, an American multinational oil and gas entity headquartered in Texas, said on Thursday that its third-quarter result could slip into larger-than-anticipated loss as the company continues to struggle from the pandemic-driven slowdown.

“From 2015-18 chemicals represented 25% of XOM’s earnings, the largest of the global oil majors. However, a collapse in industry margins drove an 85% reduction in segment earnings in 2019 vs. 2015-18 avg. Now, a global petchem recovery could drive a needed uplift to earnings and cash flow,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

Exxon Mobil’s shares closed 2.30% higher at $33.74 on Monday; however, the stock is down about 60% so far this year.

The company said in a filing that higher oil prices would help exploration and production earnings by $1.4 billion to $1.8 billion, compared with the second quarter, But subdued gas prices will continue to weigh on the segment and could hurt earnings by as much as $500 million, Reuters reported.

Exxon Mobil will report its Q3 results on October 30.

U.S. oil giant Exxon Mobil said on Monday that as part of an extensive global review outlined during ExxonMobil’s second-quarter earnings call, the company plans to reduce staffing levels across a number of its European affiliates.

“While Exxon Mobil (XOM) would benefit from an uplift in chemicals margins, we expect low oil & gas prices and refining crack spreads to weigh on future cash flow and earnings. Despite increasing our 2021/22 EPS, we remain 50% below consensus in both years. Though management is committed to sustaining the dividend, we estimate the coverage of only 55% in 2021 and 35% in 2022, driving leverage higher despite an improvement in chemicals margins,” McDermott added.

“We estimate net debt to capital will increase to 28% by the end of 2021 and 32% by year-end 2022. Further, we believe that capex will ultimately need to increase from the 4Q20 anticipated run-rate of $19B toward $25B or higher to stabilize the business. During our recent conversation with the company, XOM outlined further opex and capex cuts as tools to limit the strain on the balance sheet and preserve the dividend.”

Exxon Mobil stock forecast

Eleven analysts forecast the average price in 12 months at $43.78 with a high forecast of $55.00 and a low forecast of $33.00. The average price target represents a 29.76% increase from the last price of $33.74. From those 11, two analysts rated ‘Buy’, seven analysts rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $46 with a high of $85 under a bull scenario and $23 under the worst-case scenario. Citigroup lowered their price target to $33 from $42; JP Morgan cuts target price to $37 from $51; Scotiabank slashed their price target to $45 from $47 and Wells Fargo cuts price target to $43 from $46.

Several other analysts also recently issued reports on the company. Exxon Mobil had its price objective upped by Royal Bank of Canada from $45 to $50. The firm currently has an underperform rating on the oil and gas company’s stock. MKM Partners initiates with buy rating and $55 price target. Independent Research cuts target price to $ 42 from $47; rating hold. HSBC raised the target price to $48 from $47.5.

Analyst comment

“Attractive investment opportunities, but above average execution risk. XOM reduced its 20/21 capex plans, deferring but not abandoning its counter-cyclical growth strategy. Capex ultimately needs to move higher to stabilize the business, and while XOM does have high-quality investment opportunities, funding the capital program and the dividend will strain the balance sheet absent higher commodity prices, making dividend sustainability a lingering risk,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

“High capex limits FCF. Higher spending and more exposure than peers to current downstream & chemicals margin weakness leads to lower FCF yield. Earnings growth targets appear hard to achieve with current downstream & chemicals margins,” he added.

Upside and Downside Risks

Upside: 1) Higher commodity prices, including liquefied natural gas (LNG). 2) Successful execution of major capital projects. 3) Permian well performance improvements- highlighted by Morgan Stanley.

Downside: 1) Lower commodity prices. 2) Cost overruns on major capital projects. 3) Service cost inflation in the Permian erodes returns. 4) Geopolitical risk could impact production volumes and/or returns; Guyana is a particular focus now.

U.S. Stocks Mixed As Traders Wait For New Catalysts

Coronavirus Aid Package Negotiations Are Back In The Spotlight

Once again, traders turn their attention to coronavirus aid package negotiations amid signs that Democrats and Republicans may agree to a smaller version of the deal.

Yesterday, U.S. House Speaker Nancy Pelosi indicated that Democrats were ready to significantly decrease the size of their proposal to speed up negotiations.

Later, Reuters reported that an official from the Trump administration stated that some negotiators were willing to agree to a smaller version of the coronavirus aid bill worth about $500 billion.

There are few doubts that the U.S. economy needs another round of stimulus so any positive news on this front will provide additional support to stocks.

S&P 500 futures are little changed during the premarket trading session as traders want to see more details about the potential deal before pushing stocks to new highs.

Oil Lacks Momentum Despite Another Inventory Draw

API Crude Oil Stock Change report indicated that crude inventories declined by 4.3 million barrels. Today, the EIA Weekly Petroleum Status Report is set to confirm these numbers.

While crude inventories continue to decline, suggesting that oil demand rebounds, oil fails to gain any significant momentum. Meanwhile, major oil stocks like Exxon Mobil or Chevron are starting to lose ground.

At this point, it looks like market participants believe that coronavirus-related problems will not go away in the upcoming months and are unwilling to increase their bets on higher oil prices.

FOMC Minutes Are Set To Provide Additional Insight Into Fed’s Thinking

Later today, traders will have a chance to digest FOMC Minutes from the recent Fed meeting.

The key question for the market is whether Fed is ready to adopt an inflation target and prepare for inflation of more than 2% to revive the economy.

The Fed’s commentary is especially important for the U.S. dollar which continues to lose ground against a broad basket of currencies. Yesterday, the U.S. Dollar Index managed to get below yearly lows at 92.50 and tried to gain more downside momentum.

For stocks, weaker dollar is a positive catalyst. In case the U.S. Dollar Index tests the 92 level, S&P 500 may get to the test of the 3400 level.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil: a Panther Crouching for a Spring

What do we see when we look at the chart with the price behavior of one or another trading instrument? We see the result of several decisions and actions. But decisions aren’t made without reason. They are made under the influence of expectations, opinions, and analytical conclusions from observations and calculations. But in addition to that, the chart may show the general feeling of market players.

So, what can the chart with the Brent price dynamics over the last four years tell us? The decline started in February 2013 and stopped in January 2015. Since then, the market has been correcting the previous decline. If the first year of the correction looked like an uptrend, then this year it looks more like a downtrend.

Brent Oil Weekly Chart
Brent Oil Weekly Chart

However, inside this descending correctional structure, we can see a local ascending tendency. As a result, we can see the situation, when the newly-formed rising impulse may break the descending tendency on the more global scale. The only deterrent is the level of 54.90 (the high reached on May 25th 2015). It means that after reaching this level, the market may be slightly corrected, but then continue its growth. In this situation, one of the most difficult tasks is to predict upside targets, because this growth is likely to be only mid-term. The closest upside target might be the high reached on January 3rd 2017 at 58.50.

Brent Oil Daily Chart
Brent Oil Daily Chart

So, what can influence the development of the uptrend in the short-term? According to the EIA (the US Energy Information Administration), the Crude Oil Inventories in the USA lost almost 13%. Also, they reported on the US Oil Rig Count, which reduced as well. May be the decline in the oil prices forced American drilling companies to slow down a bit. In addition to that, there were some speculations that Exxon Mobil Corp. Would close one of its largest oil refineries in the USA. Some political issues in Venezuela, which may result in the oil delivery interruptions, probably supported the growth of the prices. Reports of the oil extraction suspension in the largest fields of Libya, the Sharara field, affected traders and investors as well. The Crude Oil Inventories in the USA are steadily decreasing and it probably means that there is some kind of balance on the market. If this dynamics continues, the outlook for the oil will be “bullish”, taking into account the decrease of the oil extraction by Russia and the OPEC countries. The Afghanistan strategy, presented by Donald Trump, was due in no small part to that. The strategy implied that the American soldiers would stay in the country, but at the same time, Trump promised to implement a heavy-handed and pragmatic approach to support the government in Kabul. In the wake of the above-said, one may assume that market players, traders and investors snatched at every opportunity to benefit from the oil process increase.

Also, we may assume that the OPEC’s comments about the oil extraction suspension due to the excessive supply on the market are not taken seriously. And the fulfillment of obligations relating to the oil production decrease by the members of the organization leaves a lot to be desired. However, in the short-term, it might serve as a deterrent. In the long-term, the oil market will reduce the influence of progressing technologies and less expensive energy resources.

This article is written by Dmitri Gurkovskiy, a senior analyst at RoboForex