S&P500 still has growth potential | 03 Maret 2017

Forecast for the week from February 27th to March 3rd:

XAU/USD:

Considering that important US macroeconomic statistics is scheduled for the second half of the week, I would suggest selling gold starting from Wednesday. It is better not to sell it during the first two days of the week because the situation is quite unclear. Gold may either grow to 1370 region or fall to 1240 region. I believe, the main reason for decline is strengthening of US dollar.

ISM manufacturing and non manufacturing indices may show strong data again. The indicator of positive data release on manufacturing indices is significant increase of Philly Fed Manufacturing Index and New York Fed Manufacturing Index. As for Non Manufacturing indices, CB Leading needs to be pointed because at the latest release it showed increse by 1,86% per annum against 1% per annum last year. Thus, business activity boost was detected. Strong ISM data will have positive impact on dollar quotes, which is, in its turn, negative for gold quotes. Trading recommendation: On March 1st Sell with 1% take-profit order.

Brent:

Previous week oil tested upper border of six-week period. Then buyers entered the market and forced quotes down. For now fundamental factors are good enough to push quotes soon to the lower flat border (53,83). First of all, OPEC+ and Russian reduced oil output has been already put into oil quotes and third party (США) increased oil output to the 10-month highest. Previous week American oil companies have ramped up their export to new historical high which is 1,2 million barrels per day. American oil is of quite high quality, so it will be easy to find buyers.

Second of all, USDX trades stably at 100,00 and considering positive US macroeconomic statistics we may expect smooth quotes increase, as Fed claims to implement rate hike on one of the next meetings. Dollar growth has traditional negative impact on oil quotes as energy is quoted in dollars. Trading recommendation: Sell 56,30/57,60 and take profit 55,00.

S&P500:

Many media say that American stock market is on the verge of correction - 10% decline from the current historical high. We may as well see such a scenario but not this week. Now American stock market situation is positive. Broad market index trades at P/E 31, implying yield of 3.22% per annum. 10-year Treasury bonds are trading with yield of 2.32%. Thus, spread is 0.9%. For instance, two weeks ago it showed 0.73%. Indicator increase is positive for shares. We have such dynamics because of strong quarterly corporate reports. So shares still have growth potential. VIX closed previous week with moderate decline. Besides, it hasn't renewed its year low, which is also positive for shares. Usually when VIX renews its extremes shares sale takes place. As we mentioned earlier we may expect positive ISM release this week, which will have positive impact on shares. Trading recommendation: Buy 2362/2349 and take profit 2386.