Recap: Week Ending March 27, 2015

March 29, 2015

Markets traded lower last week as the sideways movement continues in equities. Since the most recent FOMC meeting the market appears to be uncertain about the next direction to take, with moves in either direction occurring with little conviction. The NASDAQ 100 was the weakest of the bunch in the US last week, closing down 2.82%. Despite a bid in the crude complex, the Toronto Stock Exchange fell 0.87% last week. Crude last week was able to bounce off multiyear lows, closing the week up 4.26% or $1.98. Despite an oversupply of what many call black gold, rising conflict in Yemen sent shock waves through the energy world. Even though Yemen is a relatively small producer of oil, it is still a hub for delivery and shipping. Any conflict in the country which may stop shipments could have substantial impacts on the global market and pricing. Despite the bid in crude, the Canadian Dollar was unable to move higher. Last week the Canadian currency closed down 0.46%. One of the big winners on the week as a result of the weakening USD across the board was Gold which saw a rally of 1.4% or $16.6.

From a technical view, the TSX chart looks like it may be due for a breakdown. In recent articles, we have looked at the TSX’s MACD, Moving Average Converge Divergence indicator, and how it has provided critical reversal signals. At the moment, the MACD is currently starting to rollover on the daily basis; signally a possible selloff could be on the horizon. The last time the MACD created this signal the TSX sold off 4.5%. To confirm this signal in the MACD, the Relative Strength Index, is starting to break down, also indicating a breakdown in price action. These signals are also playing out in a similar fashion on a weekly chart, signaling that the move is not short term based but also longer time frame active as well.

Pending regulatory approval, the CME Group, home of the crude futures, will list a new contact on Monday based on the storage location of crude. Essentially the holder of a contract has locked in the price for which they will be charged to store 1,000 barrels of crude. Currently, the contact has availability for 7 million barrels; however, this could expand following potential success of the contact. The CME’s executive director and head of North American energy products told Reuters, “All commodities are subject to storage costs, and much of that is dependent on the forward curve. We’re hoping this contract will help price transparency of prompt storage.” As the world is currently experiencing a surplus of crude, this contact is expected to attract the likings of many large players in the energy market.

This week is a shortened week with markets being closed Friday for Easter. Despite the closure Friday, the US will report its unemployment rate for the month of March. Thursday will likely be a busy day with large orders and strange action as many traders and fund managers adjust their positions prior to the unemployment figure which they cannot trade as it is released on a holiday. Like all unemployment reports, this report will signal the overall strength of the US economy, in turn shedding light on the possibility of a rate hike based on its result.

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