Home › Market News › Natural Gas, Stock Seasonality’s & Putting Politics Aside
The Economic Calendar:
MONDAY: Fed Goolsbee Speech (9:00a CT), NAHB Housing Market Index (9:00a CT), Overall Net Capital Flows (3:00p CT)
TUESDAY: Building Permits (7:30a CT), Housing Starts (7:30a CT), Redbook (7:55a CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), EIA Petroleum Status Report (9:30a CT), 20-Year Bond Auction (12:00p CT)
THURSDAY: Jobless Claims (7:30a CT), Philly Fed Manufacturing Index (7:30a CT), Existing Home Sales (9:00a CT), EIA Natural Gas Report (9:30a CT), Kansas Fed Manufacturing Index (10:00a CT), Fed Goolsbee Speech (11:25a CT), Fed Hammack Speech (11:30a CT), Fed Balance Sheet (3:30p CT)
FRIDAY: S&P Global Manufacturing PMI (8:45a CT), University of Michigan Consumer Sentiment (9:00a CT), Baker Hughes Rig Count (12:00p CT)
Key Events:
Trading decisions should be based on objective analysis rather than subjective political opinions. It’s crucial to avoid making investment choices solely based on personal beliefs about political events or figures. For example, I think Trump’s winning is good, so I will get long today.
Or, I think Trump winning is terrible therefore, I will short the market.
Instead, successful traders focus on analyzing market data, identifying trends, and managing risk. By objectively evaluating price action and market indicators, traders can make informed decisions that maximize potential returns while minimizing risk. As traders, we observe price action and trends and THEN make good risk/reward trades.
It’s important to remember that a multitude of factors drive markets, and political events are just one piece of the puzzle. Prioritizing technical and fundamental analysis over personal opinions can lead to more consistent and profitable trading strategies.
This past week, the stock market experienced a slight pullback, giving up some of its post-election gains.
While the S&P 500 declined by approximately 2% for the week, it still maintains a substantial year-to-date gain of over 23% and a 1% increase since the US election.
October’s CPI data was in line with expectations, indicating a continued downward trend in inflation. However, specific components like shelter, rent, and motor vehicle insurance have shown more persistent price pressures.
Despite this, there’s optimism that inflation will gradually approach the Fed’s 2% target in the coming months and potentially stabilize within the 2-3% range over the longer term.
Uncertainty surrounding policy, particularly tariffs, has introduced some caution into the market. While tariffs can impact consumers, historical data suggests that their long-term inflationary impact, especially for targeted tariffs, is limited.
As we enter the seasonally strong period for stocks, positive economic fundamentals continue to support the ongoing bull market. While policy uncertainty may lead to occasional bouts of volatility, the market’s ability to navigate these challenges will depend on sustained economic growth and contained inflation.
The market typically enters a seasonally strong period as we transition into the year’s final months.
Historically, November and December have been particularly positive months, especially in election years.
This year, the post-election rally has already significantly boosted market performance. While there’s potential for continued momentum, some seasonal gains may have been realized early.
What trades are crowded (for now)…
What’s not crowded (for now)…
Fed Fund Futures now see just a 63% chance the Fed will cut rates again next month. Fewer than three quarter-point cuts are fully priced over the next year, and some economists think Fed rates may not get back below 4% in this cycle.
The Federal Reserve’s recent policy decisions and market reactions have shifted expectations for future rate cuts. While the market initially priced in multiple rate cuts, the recent economic data and Fed officials’ comments suggest a more cautious approach.
The Fed’s 75 basis point rate cut in the previous two meetings was seen as a proactive move to address potential economic slowdown and easing inflationary pressures. However, the recent economic indicators, including a stronger-than-expected producer price index and lower jobless claims, have tempered those concerns.
As a result, the market now anticipates fewer rate cuts and a potential pause in the easing cycle. The 12-month Treasury bill rate and the two-year note yield have both climbed to levels just below 4.4%, reflecting reduced expectations for aggressive rate cuts.
Below is the probability for the December 18 FOMC interest rate decision meeting.
Source: Investing.com
The recent price action in the natural gas futures market has been intriguing. Henry Hub’s third attempt to breach the $3 level in recent months, only to be rejected, has sparked debate among traders.
While some technical analysts might interpret this as a bearish sign, others, particularly those familiar with the “triple-top-not-a-top” heuristic, see the potential for further upside.
The surge in the December contract, characterized by a large up-candle, has been fueled by a short squeeze. This is particularly evident considering the record-short position held by
Managed Money accounts heading into November.
Despite these short-term dynamics, the prevailing sentiment in the market remains bearish. The combination of low cash prices and ample storage levels has discouraged long positions, creating an opportunity for significant price spikes triggered by unexpected colder weather.
The recent bearish EIA storage report further solidified this bearish sentiment. With storage levels exceeding the five-year average and a net increase of 42 Bcf from the previous week, the market is well-supplied, limiting upside potential.
Source: TradingView
Oil prices have been volatile recently, caught between conflicting signals from OPEC and the broader economic outlook. Despite low global supply levels, OPEC’s persistent pessimism and concerns about member compliance with production cuts are exerting downward pressure on prices. Conversely, the strong US economy, fueled by the “drill baby drill” policy, is supporting oil demand and providing upward momentum.
Traders are closely watching the upcoming OPEC meeting on December 1st. The cartel is expected to discuss potential production cut extensions or additional reductions, and the outcome could significantly impact oil prices.
The interplay of these factors has resulted in a choppy trading environment, with oil and product prices experiencing significant volatility. As market participants grapple with these conflicting signals, it is crucial to monitor developments closely and adjust trading strategies accordingly.
Bitcoin has experienced a significant rally since the US election, surpassing the $93,000 mark. This represents a 34% increase, fueled by considerable optimism.
Options market data from Deribit indicates a growing belief that Bitcoin could reach $100,000 by the end of the year.
MicroStrategy, a major corporate investor in Bitcoin, has further solidified its position by acquiring an additional 27,200 Bitcoin worth $2 billion.
While Bitcoin has surged, other cryptocurrencies like Ethereum and Dogecoin have not fully recovered from their 2021 highs. Ethereum remains 28% below its all-time high, and Dogecoin is still 40% below its record price.
Source: TradingView
