Natural gas markets fell again during the day on Thursday, slicing through a bit of short-term support. The market also broke down below the $2.85 level, and it looks likely that the $2.90 level is now going to continue to offer a bit of a “ceiling” in the market. Natural gas markets continue to be volatile regardless.
Natural gas markets have pulled back from the $2.90 level rather stringently, showing signs of negativity. If we can break down to a fresh, new low, the market should then go down to the $2.80 level, and eventually the $2.70 level after that. The market has been consolidating for quite some time, and we had gotten a bit too close to the highs recently to continue going to the upside. At this point, I think that the $2.90 level will continue to bring in a lot of fresh selling, and even bullish inventory numbers won’t do much to hold the market up for the longer-term as the $3.00 level has been extraordinarily resistive.
The $2.70 level underneath is massive support though, so I think that’s about as low as we go. I intend to continue to play the range going forward, unless of course it gets smashed somehow. It’s been very reliable for quite some time now, so I don’t have any interest in trying to front run any type of major move. I believe that more of the same as in store, and for those who can take the longer-term outlook, this is a great market to trade. The day-to-day operations of the natural gas pits are a bit more nauseating though, but at the end of the day there are clear boundaries if you step back and look at the weekly charts.
The crude oil markets initially tried to rally during the trading session on Friday, but then turned around to show signs of weakness.
At this point, things are getting interesting as we are approaching rather significant potential support.
That being said, the technical analysis suggests that we are at a major inflection point.
West Texas Intermediate Crude Oil
The West Texas Intermediate Crude Oil market initially tried to rally a bit during the trading session, and even managed to peak above the 200-Day EMA at one point. However, it could not continue that momentum and it looks as if the drop was almost instantaneous. At this point, we reach down to the $70 level, which is an area where we have seen a lot of noise previously. At this point, you have to wonder whether or not we will have buyers coming back into the market?
If the market were to turn around and jump above the last couple of candlestick, then it could open up the possibility of taking out the $80 level above, which obviously would put a lot of bullish attitude into this market and perhaps give a little bit of relief for those who are bit cautious about the crude oil market in and of itself.
Brent
Brent initially tried to rally during the trading session as well, but it looks as if the $84.50 level is going to offer a significant amount of resistance. The 200-Day EMA is in this general vicinity, therefore I think you get a situation where we are going to see a lot of noisy behavior. Underneath, we have a lot of support, but at this point in time there is not much driving the market and at this point that suggests that we are ready to go higher. That being said, it’s not necessarily easy to go higher in this type of environment, but geopolitical noise could come into the picture in turn things around almost instantly.
That being said, keep in mind that cyclically speaking, this is typically a very bullish time of year as well. What does the oil market tell us about the overall economy? That could be the real question to ask at this point in time.
Saudi Arabia’s decision to raise crude prices for June across the majority of regions had an impact on oil futures, signalling strong demand expectations for the summer. This adjustment coincided with ongoing geopolitical tensions in the Middle East, where the possibility of a Gaza ceasefire remains uncertain, potentially affecting the stability of a critical oil-producing area.
Last week, oil prices saw significant declines, with Brent crude dropping over 7%. This reflects the market’s reaction to weaker U.S. job data and anticipation of Federal Reserve policy adjustments. The reduction in the number of U.S. oil rigs also suggests a tightening supply, further impacting future oil and natural gas price forecasts.
Profit-taking drove March Comex Copper futures sharply lower on Tuesday as investor reacted to a stronger U.S. Dollar, concerns over demand from China and weakness in other industrial metals.
The stronger U.S. Dollar helped limit purchased by foreign buyers. Mixed signals from China’s economy is weighing on demand. Nickel prices hit their lowest level in more than six weeks on Tuesday dragging down copper prices.
Daily March Comex High Grade Copper
Daily Swing Chart Analysis
The main trend is up according to the daily swing chart. However, Tuesday’s steep sell-off triggered a shift in momentum to down.
A trade through $3.1985 will signal a resumption of the uptrend. A move through $3.0550 will change the main trend to down.
The main range is $2.9135 to $3.2790. Its retracement zone at $3.0960 to $3.0530 is the primary downside target. This zone is controlling the longer-term direction of the market.
The intermediate range is $3.2790 to $3.0550. Its retracement zone at $3.1670 to $3.1935 stopped the rally on November 24 and provided resistance on Monday.
The short-term range is $3.0550 to $3.1985. Tuesday’s close below its retracement zone at $3.1270 to $3.1100 is a sign of short-term weakness.
Daily March Comex High Grade Copper (Close-Up)
Daily Swing Chart Forecast
Based on Tuesday’s close at $3.0985, the direction of copper futures today will be determined by trader reaction to the major 50% level at $3.0960.
A sustained move over $3.0960 will indicate the presence of buyers. However, an early rally will be labored because of potential resistance at $3.1100 and $3.1270. Taking out $3.1270 with strong buying could trigger an acceleration into $3.1670 to $3.1935.
A sustained move under $3.0960 could trigger an acceleration into $3.0550 and $3.0530. The daily chart indicates there is plenty of room to the downside if $3.0530 fails as support.
Natural gas futures are edging lower shortly before the release of the government’s weekly storage report at 14:30 GMT. The report is expected to show a build that is slightly below the 5-year average.
The early weakness could be a reaction to overnight comments from the European Commission on Thursday that said gas supply is not at risk from a Ukraine transit issue.
If you recall, Ukraine announced on Tuesday that it would suspend the flow of gas through a transit point bringing Russian fuel to Europe. Traders saw this as a bullish sign. However, earlier today, the EU said it does not present a gas supply issue. Instead, it blamed Moscow for the disruption.
U.S. natural gas futures gained about 4% on Wednesday on a big drop in daily output over the past three days and forecasts for more demand this week than previously expected. The shutdown of a pipeline carrying Russian gas through Ukraine also helped support U.S. gas futures by temporarily lifting European prices.
Short-Term Weather Outlook
According to NatGasWeather for May 12-18, “Texas and the South Plains remain very warm to hot with highs of 80s and 90s, while the West into the Northern Plains remains mild & unsettled as weather systems track through.
It’s also warm from the Southern Great Lakes to the South as high pressure rules with highs of 80s to lower 90s.
The East will be nice with 70s and 80s despite a weather system off the coast that’s slowly tracking into the Southeast with showers.
For late this week through mid-next week, the northern U.S. will be comfortable with highs of 60s and 70s as late season weather systems track through, while the southern U.S. remains very warm to hot with highs of 80s and 90s, besides 100s in the Southwest deserts into West Texas.”
US Energy Information Administration Weekly Storage Report
According to survey averages, today’s EIA storage report is expected to show an injection of 80 Bcf for the week-ending May 6. This is slightly below the 5-year average of 82 Bcf.
Natural Gas Intelligence (NGI) is reporting that analysts are expecting an injection in the low 80s Bcf. Bloomberg’s survey showed estimates of 64 Bcf to 85 Bcf, with a median of 81 Bcf.
Last year the report showed an injection of 70 Bcf during the same week last year and a five-year average increase of 82 Bcf.
Daily June Natural Gas
Short-Term Outlook
June natural gas futures are currently trading between retracement zone resistance at $7.713 to $8.016 and retracement zone support at $6.779 to $6.256.
Since the longer-term trend is up and expected to be supported by strong fundamentals, we’re looking for bullish traders to continue to support the market on breaks back into support.
On the upside, a sustained move over $8.016 could bring in aggressive traders willing to buy strength.
Excessive heat over the next two weeks will make it difficult to close the current storage deficit even if output increases. This is supportive for higher prices.
For a look at all of today’s economic events, check out our economic calendar.
Natural gas markets have dropped a bit during the trading session on Friday to break down below the $2.50 level, and now it looks as if we are ready to go much lower. At this point, if we continue to see any negativity, it’s likely that the $2.00 level could be a target. The $2.00 level is a large, round, psychologically significant figure and an area that has been important in the past, and of course will attract a lot of attention. At this point, this is a situation where things have gotten so out of control you cannot chase the market all the way down here.
The only thing I think you can think about doing at this point is waiting for some type of bear market rally that you can start fading at the first signs of exhaustion. If you are short-term day trader, then you can fade short-term rallies, but you need to keep in mind that this is a market that is way oversold at this point, and seemingly is right for some type of bear market rally that could rip the face off of sellers.
The 50-Day EMA is near the $4.14 level and is dropping, so I think it’s likely that we could see that offer a bit of resistance on a rally, and I think at this point it’s very likely that we would see some type of cold snap cause this, but quite frankly the cold snap that is going on right now in the United States has not moved the needle, so we will have to wait and see how this plays out.
For a look at all of today’s economic events, check out our economic calendar.
The oil markets suffered their steepest weekly losses in three months, prompted by disappointing U.S. job data and uncertainty surrounding Federal Reserve interest rate policies. The recent decision by the Federal Reserve to maintain interest rates points to ongoing concerns about inflation and economic stability. High interest rates typically strengthen the dollar, making oil more expensive for holders of other currencies and potentially reducing demand.
Supply and Demand Factors
There has been an unexpected rise in U.S. crude inventories, with a significant build of 4.91 million barrels, contrasting sharply with the anticipated decrease. This surge in supply, coupled with a recent increase in U.S. crude production to 13.15 million barrels per day, suggests an oversupply in the market. Such conditions typically lead to price declines as supply outstrips demand.
Geopolitical Influences and OPEC+ Strategy
The geopolitical risk premiums related to the Israel-Hamas conflict have diminished as both sides consider a ceasefire and engage in talks. Additionally, the next OPEC+ meeting scheduled for June 1 may extend its voluntary output cuts, should oil demand not increase. Such strategic decisions are crucial as they directly influence market supply and potentially stabilize or increase oil prices.
Market Forecast: Bearish Outlook with Potential for Rebound
The current market scenario is bearish with rising supplies and weakening demand underpinned by cautious economic policies. However, there are opportunities for bullish technical traders looking for value buying, especially if prices test the retracement zone at $76.91 to $74.49. This zone is crucial for traders focusing on precision entry points in the market, indicating a potential short-term rebound if supported by favorable economic or geopolitical developments.
Overall, traders should stay vigilant, monitoring upcoming OPEC+ decisions and potential U.S. actions regarding strategic oil reserves, as these will significantly impact the direction of oil prices in the coming weeks.
Gold (XAU/USD) dropped for the second straight week, with prices settling just above the $2,300 threshold heading into the weekend. This occurred against a backdrop of relatively moderate volatility following key market developments, notably the Federal Reserve’s monetary policy announcement midweek and the release of the U.S. employment report on Friday.
Bullion’s retreat caught many traders off guard, as they had anticipated a stronger response amidst falling U.S. bond yields, which fell sharply after Fed Chair Powell dismissed the idea of resuming rate hikes and indicated the next move is still likely to be a cut, despite renewed inflation worries. This dovish stance injected a sense of optimism into the market, boosting risk assets at the expense of defensive plays.
Even the U.S. jobs report, arriving weaker than anticipated and emboldening FOMC easing wagers, failed to prop up the precious metal. While traders may find the market’s reaction perplexing, it’s important to acknowledge that the frequently dominant inverse relationship between gold and rates significantly weakened earlier this year, with both going up at the same time.
For an extensive analysis of gold’s fundamental and technical outlook, download our complimentary quarterly trading forecast now!
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Looking ahead, mounting signals of economic vulnerability, the Fed’s plans to start easing, and the emerging downtrend in the U.S. dollar, should be bullish for precious metals, at least in theory. However, given the significant rally already seen in the space this year and its detachment from fundamentals, it would not be surprising to see gold continue to deflate or trade sideways, bucking tailwinds.
In terms of upcoming catalysts, the U.S. economic calendar lacks major high-profile events and looks relatively quiet in the week ahead, implying that volatility is unlikely to surge and may stay contained for now. However, this picture could change later this month with the release of the April consumer price index, scheduled for May 15. Any surprises in the data could again alter sentiment and trigger sharp price swings.
Interested in learning how retail positioning can shape the short-term trajectory of gold prices? Our sentiment guide has the information you need—download it now!
Change in
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GOLD PRICE TECHNICAL ANALYSIS
After a poor performance this week, gold (XAU/USD) briefly hit its lowest mark in nearly a month, yet succeeded in maintaining its position above support at $2,280. Bulls will need to protect this floor fiercely; a lapse in defense could trigger a descent toward a key Fibonacci level at $2,260. Continued losses from this juncture would bring the 50-day simple moving average at $2,235 into play.
In the event of a bullish turnaround from present levels, the first technical hurdle to watch closely can be identified at $2,325, followed by $2,355. Although reclaiming this territory might pose some difficulty for buyers, a decisive breakout could pave the way for a rally towards $2,375 – a short-term descending trendline originating from the record high.
Given the improvement in momentum and the likely strong closing price for the week, the initial targets could eventually be exceeded. That is, if demand remains strong. The next target zone begins with the completion of an extended rising ABCD pattern at 2.20. That is where the CD leg of the advance is 127.2% of the AB leg.
Nonetheless, an initial Fibonacci retracement of 38.2% is at 2.24, with that price level confirmed by previous support from the December 11 swing low. If natural gas can get through that price level and keep rising it may have a chance to eventually test resistance around the 200-Day MA, which is currently at 2.47.
Signs of Strength in Monthly Chart
Confirmation of strength on both the monthly and weekly charts provides further evidence for a bullish reversal of the bottom from February. This means that that rally should have more to go, and it may just be getting started. Today’s price action extends an advance off support around the lower blue dash trend channel line.
In general, once prices rise above from support at the bottom of a channel, an eventual target is the top channel line. This doesn’t mean it will be reached, just that it could be. Of course, the price represented by the upper line will depend on when it is reached, given that it is downward sloping. However, given that it is now a potential target, it may make the lower price targets more likely to be reached.
For a look at all of today’s economic events, check out our economic calendar.
Shares of the company fell 12% in extended trading.
“In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead,” CEO Laxman Narasimhan said in a statement. “It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us.”
The company’s same-store sales fell 4% as traffic to its cafes declined 6% in the quarter. Wall Street was anticipating same-store sales growth of 1%, according to StreetAccount estimates.
Across all regions, Starbucks reported shrinking same-store sales and falling traffic.
In the U.S., same-store sales decreased 3% as traffic sank 7%. This marks the second quarter that the company’s home market has struggled. Last quarter, executives blamed sluggish sales on boycotts targeting the company due to “misperceptions” of its stance on Israel.
Starbucks’ international segment reported same-store sales declines of 6% as both average ticket and transactions dropped. In China, Starbucks’ second-largest market, same-store sales plunged 11%, fueled by an 8% decline in average ticket.
“In this environment, many customers have been more exacting about where and how they choose to spend their money,” Narasimhan told analysts on the company’s conference call.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: 68 cents adjusted vs. 79 cents expected
Revenue: $8.56 billion vs. $9.13 billion expected
The coffee giant reported fiscal second-quarter net income attributable to the company of $772.4 million, or 68 cents per share, down from $908.3 million, or 79 cents per share, a year earlier.
Net salesdropped nearly 2% to $8.56 billion.
For fiscal 2024, Starbucks now expects revenue growth in the low single digits, down from its prior forecast of 7% to 10%. The company also revised its projections for global and U.S. same-store sales growth to a range of low single digits to flat from its previous forecast of 4% to 6%. Same-store sales in China are expected to decline by single digits, down from the prior outlook of a single-digit increase.
Starbucks now also expects earnings per share growth in a range of flat to low single digits. It previously forecast its earnings would climb 15% to 20% in fiscal 2024.
The company forecasts that sales will start improving in the fiscal fourth quarter.
Starbucks’ most dedicated customers have stayed loyal and been using discounts offered via the company’s mobile app, executives said. But coffee drinkers who visit only occasionally have been buying Starbucks’ macchiatos and cold brew less often, executives said; Narasimhan said those customers want more variety from their coffee.
Starbucks is planning to offer a version of its app that allows customers to order without being a loyalty member in order to attract these occasional customers to visit more frequently.
Narasimhan said Starbucks is also exploring how to meet overnight demand, from 5 p.m. to 5 a.m. The company conducted a pilot test, which Narasimhan said doubled business.
He also said the chain’s lavender drinks were one of its most successful launches.
“Building off that success, we are aggressively pursuing options to build a $2 billion business over the next five years,” he said.
“While it was a difficult quarter, we learned from our own underperformance and sharpened our focus with a comprehensive roadmap of well thought out actions making the path forward clear,” CFO Rachel Ruggeri said in a statement.
Narasimhan also said that the company now expects supply-chain cost savings of $4 billion over the next four years, revising its prior forecast of $3 billion over three years.
