Weekly Update (Week of 4/17/2023)
Weekly Update: April 17th, 2023
Trading Portfolio: (It is a link to Google Sheets)
General Major News/Economic Developments
- U.S., Allies Weigh How to Reduce Economic Ties With China
- Saudi Arabia, U.A.E. Scoop Up Russian Oil Products at Steep Discounts
- Economists Turn More Pessimistic on Inflation
Metals
Developments/News
Gold
Gold is performing price discovery on a day-by-day basis. It is making both higher highs and lower lows. While this does not provide a clear directional bias, the risk/reward for a gold long is phenomenal here, especially considering the 2000 round level support. I picked up one contract long @ 2007.5. My stop loss is a daily close below 2000 supported by high volume, and my target to the upside is the blue trendline (new high).
China (a large holder and consumer of gold) has a wavering economic outlook. Find current Citibank expectations outlined in this graph:
Chinese gold ETF holdings can be tracked here with monthly flows on the left axis and collective holdings on the right:
Silver
Silver jumped right up to and stopped at the top of the channel. Technically, a cooldown is due after this intense rally we saw over the past month and a half. $25 is also a critical level to hold alongside gold $2000.
The last two days of pullbacks can be attributed to revised monetary policy outlooks by analysts and adjusted FOMC expectations.
Copper
The trade we took on the 8EMA last week paid off brilliantly. I closed the trade at 4.178 for a massive profit of $21.4K. Apart from this, copper largely stays in the range from its January rally, trying to decide on a direction. My best guess is we go up.
Copper mining company Anglo American was recently approved for a $3.5B integration upgrade to its Los Broncos copper mines. This comes after a rejection by the Environmental Assessment Service of a similar proposal made by Anglo American.
Agriculture
Developments/News
Coffee
Coffee prices broke out definitively from the cone we were watching. I stopped out of the short I took last week for a haircut loss. My new trading plan revolves around the supply zone overhead (marked in red) at around the red oval. This seems like a decent place for a short, but I will wait for my confirming signals.
Coffee prices Monday rallied sharply, with arabica climbing to a 6-1/4 month nearest-futures high. Expectations for global coffee supplies to tighten have sparked fund buying of coffee futures. ICE monitored arabica coffee inventories Monday fell to a 4-month low of 709,612 bags.
Additionally, the odds of an El Nino weather event have increased providing further support for coffee prices in an expectation of a reduction in production.
El Niño is the warm phase of the El Niño–Southern Oscillation and is associated with a band of warm ocean water that develops in the central and east-central equatorial Pacific, including the area off the Pacific coast of South America.
Cocoa
Cocoa is sitting nicely at the top of its range once again. I took a small short at 2940.9 speculating a move down to the balanced zone. This is easily voidable and has tight overall risk.
Dwindling supplies in Ivory Coast cocoa has supported prices to return to these highs, marking a -5% decrease y/y. Nigerian exports, on the other hand, have increased substantially acting as a bearish factor, posting a +15% increase y/y
ICE-monitored cocoa inventories held in U.S. port warehouses last Friday rose to a 3-month high of 5,402,545 bags.
Wheat
We are still waiting for our trade. But while waiting we missed the demand zone formed at the last low of 654. That would have delivered a 35-point move with 0 risk in hindsight. The only thing to do now is to continue to wait for prices to approach our planned trade zone.
Not too much macroeconomic change.
Energy
Developments/News
Crude Oil (Brent)
Oil is basing over the EMA, possible priming for a move to our $92 supply zone.
Signs of strength showed face for China's economy following Tuesday's economic news. This is a bullish factor for energy demand and in turn a bullish factor on price. GDP grew greater than expectations as well as a large jump in retail sales coupled with a drop in joblessness.
In general, however, Fed comments seem bearish for crude. The hawkish outlook on rates with rate hike expectations put pressure on energy demand.
The halt of Iraqi crude continues to tighten global oil supplies and applies bullish pressure to prices. The Turkish government was to negotiate a $1.5 billion settlement that it has been ordered to pay before allowing Iraqi crude movement to resume. The halt has been ongoing since March 25th coinciding with the entire recent rally. This will be an important story to watch.
Crude Oil (WTI)
The macro story remains mostly the same. The structure for WTI crude seems slightly more bullish than Brent, but this adds a tailwind to the long idea for Brent.
Footnotes
Sources include Thinkorswim, Tradingview, Barchart, Wall Street Journal, Financial Times, Investing.com, and Metals Daily.
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