Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

Since the release of US labour market data yields have slipped. Notable price action has unfolded for only the third time since yields peaked in late March, which indicates lower yields still.Additionally, USDJPY has faltered, which is consistent with the signs in fixed income markets.But how low is low? Could this just be a short lived and relatively meaningless move down in yields or could we see US 10Y yield below 1.46% and US 30Y yield below 2.15%?

Since the release of US labour market data yields have slipped. Notable price action has unfolded for only the third time since yields peaked in late March, which indicates lower yields still.Additionally, USDJPY has faltered, which is consistent with the signs in fixed income markets.But how low is low? Could this just be a short lived and relatively meaningless move down in yields or could we see US 10Y yield below 1.46% and US 30Y yield below 2.15%?

Founder & CEO. Oil markets macro-analysis., Vanda Insights

Vandana Hari

Founder & CEO. Oil markets macro-analysis.

Vanda Insights

Vanda Insights is a Singapore-based boutique provider of intelligence on the global energy markets, launched in September 2016. The venture was born out of a desire to extract the signal from the noise in the complex and often volatile oil markets. Our succinct and clear macro analysis is relied upon by thousands of readers globally, including those doing business directly or indirectly in the physical commodity and derivatives markets; wealth managers; governments, regulatory bodies and think-tanks; as well as trade organizations and educational institutions.

Global Energy Markets

Commodities

Brent rallied to fresh two-year highs last week, finally vaulting above the $70 mark and surpassing $71 soon after.WTI vaulted to levels not seen since October 2018, with the main driver of market bullishness, a sharp rebound in US demand, giving it a relatively bigger boost.The Memorial Day weekend travel spree in the US fuelled confidence that the country had put more than a year of Covid constraints behind it. Strong macro-economic data from the country has been steadily bolstering that narrative in recent weeks.Among the confluence of factors supporting crude’s climb were OPEC+ resisting opening the spigots a bit wider than planned for June and July, the prospect of a US-Iran deal retreating into the distance, and a sustained and sharp decline in Covid cases in India allowing states to start reopening gradually. But that doesn’t mean crude is now on course for $80, a prediction some analysts touted again last week. We explain why.

Brent rallied to fresh two-year highs last week, finally vaulting above the $70 mark and surpassing $71 soon after.WTI vaulted to levels not seen since October 2018, with the main driver of market bullishness, a sharp rebound in US demand, giving it a relatively bigger boost.The Memorial Day weekend travel spree in the US fuelled confidence that the country had put more than a year of Covid constraints behind it. Strong macro-economic data from the country has been steadily bolstering that narrative in recent weeks.Among the confluence of factors supporting crude’s climb were OPEC+ resisting opening the spigots a bit wider than planned for June and July, the prospect of a US-Iran deal retreating into the distance, and a sustained and sharp decline in Covid cases in India allowing states to start reopening gradually. But that doesn’t mean crude is now on course for $80, a prediction some analysts touted again last week. We explain why.

Weekly Oil Views: Crude May Be at an Inflection Point but $80 Is a Stretch

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Today we highlight several metrics which provide evidence that risk appetites are improving, not deteriorating. This is a bullish signal for the broad market. Still, we continue to see a mixed market environment, but we remain constructive overall with the S&amp;P 500 holding above short-term support at the 50-day moving average and 4056.

Today we highlight several metrics which provide evidence that risk appetites are improving, not deteriorating. This is a bullish signal for the broad market. Still, we continue to see a mixed market environment, but we remain constructive overall with the S&amp;P 500 holding above short-term support at the 50-day moving average and 4056.

Risk Appetites Improving, A Bullish Sign; Downgrading Technology To Underweight

Is it still the time to be defensive on equities and have a notable allocation in Bonds as was described in the note from 11 May (see <a href="https://www.smartkarma.com/insights/us-equities-time-to-get-defensive" target="_blank" data-smartkarma-citation="insights:51332" rel="noopener">US Equities: Time to Get Defensive</a>)?Whichever chart we look at across markets - whether in fixed income, commodities, foreign exchange, or equities - the signs are clear…stay long bonds (Treasuries) in this environment for the short term.

Is it still the time to be defensive on equities and have a notable allocation in Bonds as was described in the note from 11 May (see US Equities: Time to Get Defensive)?Whichever chart we look at across markets - whether in fixed income, commodities, foreign exchange, or equities - the signs are clear…stay long bonds (Treasuries) in this environment for the short term.

It seems these days you simply have to check the risk on/off switch in the financial markets to guess what crude might be doing. For reasons one can only guess, investors last week chose to take reassurance from the comments of Fed officials that current inflationary pressures were transitory and the central bank had started to “talk about talking about” tapering its asset purchases as a cooling measure. The latest US weekly jobless numbers came in at a fresh pandemic low and the Commerce Department confirmed last month’s estimate of a 6.4% annualised US GDP growth in Q1.The EIA weekly US oil stocks and demand data supported the bullish narrative and WTI futures on Thursday catapulted to their highest settle since – take this in slowly – October 2018.Over five consecutive sessions of gains since last Friday, Brent and WTI futures had rallied by a cumulative 7% and 8%. There were no signs of an agreement out of Vienna, where the US and Iran, along with major world powers, have been locked in talks aimed at reviving the 2015 nuclear deal. The realisation that a deal – and fresh Iranian barrels flooding the market -- may not be imminent took the lid off prices.But this doesn’t mean crude is poised for a bull run. We look at the downside risks including the ghost of inflation, Covid’s lingering grip over parts of the world, and China tightening oversight of trading and pricing in the domestic oil and metals markets in a bid to curb inflationary pressures.

It seems these days you simply have to check the risk on/off switch in the financial markets to guess what crude might be doing. For reasons one can only guess, investors last week chose to take reassurance from the comments of Fed officials that current inflationary pressures were transitory and the central bank had started to “talk about talking about” tapering its asset purchases as a cooling measure. The latest US weekly jobless numbers came in at a fresh pandemic low and the Commerce Department confirmed last month’s estimate of a 6.4% annualised US GDP growth in Q1.The EIA weekly US oil stocks and demand data supported the bullish narrative and WTI futures on Thursday catapulted to their highest settle since – take this in slowly – October 2018.Over five consecutive sessions of gains since last Friday, Brent and WTI futures had rallied by a cumulative 7% and 8%. There were no signs of an agreement out of Vienna, where the US and Iran, along with major world powers, have been locked in talks aimed at reviving the 2015 nuclear deal. The realisation that a deal – and fresh Iranian barrels flooding the market -- may not be imminent took the lid off prices.But this doesn’t mean crude is poised for a bull run. We look at the downside risks including the ghost of inflation, Covid’s lingering grip over parts of the world, and China tightening oversight of trading and pricing in the domestic oil and metals markets in a bid to curb inflationary pressures. 

Weekly Oil Views: US Cheer Spurs Fresh Crude Rally but Downside Risks Lurk

United States

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. It is a nonrenewable resource, also known as a fossil fuel, which means that it can't be replaced naturally at the rate we consume it and is therefore a limited resource.

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Crude Oil (CL1 COM COMDTY)

Bonds & Commodities: A Picture Unfolding

The price action in Bonds and the emerging picture in major commodity markets all point towards lower yields. Breaks are yet to be confirmed though...

Shyam Devani

Weekly Oil Views: Crude May Be at an Inflection Point but $80 Is a Stretch

Crude has hit 2-year highs. The market is bullish over global oil demand recovery, led by a US rebound. But this doesn't mean prices are headed for...

Vandana Hari

Risk Appetites Improving, A Bullish Sign; Downgrading Technology To Underweight

Below we highlight several metrics which provide evidence that risk appetites are improving, not deteriorating. This is a bullish signal for the...

Vermilion Research

Bonds: All Charts Lead to Me

As we look across financial markets, there is an increasing degree of conviction that higher [US] bond prices and lower yields are likely to be...

Shyam Devani

Weekly Oil Views: US Cheer Spurs Fresh Crude Rally but Downside Risks Lurk

Crude hit two-year highs last week as broader risk appetite returned, the latest US macro data came in strong and the prospect of a US-Iran deal...

Vandana Hari

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