Crude oil pushes markets higher amidsts geopolitical tensions, investors look to earnings reports to justify positive sentiments

April 10, 2017
By Vlad Karpel

Major U.S indexes are inching toward their respective all-time highs which were met earlier this year. A strong round of corporate earnings reports could cement these gains by correlating with an equally strong investor sentiment.  

The dollar is strengthening today, following a punitive missile strike on a Syrian airbase ordered by U.S President Donald Trump. The strike was in response to a chemical weapons attack which killed over 100 civilians. The U.S Navy has also been ordered to station a strike force off the coast of North Korea and investors are wondering if a similar strike is in order. When geopolitical tension is high, investors will move to safety by investing in stable G-10 markets- in particular the U.S dollar.

The Dow is currently up 0.33%, or 68 points, at 20,731. The Nasdaq-100 is up 0.27% at 5,894 and the S&P 500 is currently trading at 2,362.93 which is up 0.30% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows consistent positive movement. Today’s positive vector figure of +0.04% reaches +0.46% in three trading sessions before easing. Today’s support and resistance is 2,345.68 (± 3.52) and 2,371.20 (± 3.56), respectively. The predicted close today is 2,357.91.   



Just one week after a Libyan pipeline shutdown, another armed group has taken over and blocked a pipeline in Libya’s Sharara oil field. Adding to this situation is heightening geopolitical tension around Syria, following last week’s U.S missile strike against a Syrian airbase which had facilitated a chemical weapons attack on civilians. This has driven prices up regardless of the massive increases in U.S domestic supplies and consistent upticks in rig counts. In the event of a geopolitical cooldown, however, we can expect bearish sentiments to return to crude oil markets. West Texas Intermediate for May delivery is currently priced at $52.93 per barrel, up 1.21% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows upward movement building incrementally and easing toward the end of the window. The fund is currently trading at $11.095, which is up 1.23% from the open. Today’s prediction sees support at $10.92 (± 0.06) and resistance at $11.03 (± 0.06). The predicted close for today is $11.03. Vector figures show +0.57% for today, then hover around +0.90% for three sessions before easing. All vector figures are based on today’s market conditions.  



The price for June gold is down 0.16% at $1,253.50 a troy ounce. The yellow metal is sliding but is able to maintain the $1,250 mark, following a boost to the U.S dollar. Gold is priced in the U.S dollar, and tends to become less appealing to foreign investors when the dollar strengthens. The perceived safe-haven asset saw an uptick following the U.S missile strike until it was clear that no further action was being taken. Many believe that this tension will remain and, in effect, so will gold’s attractiveness for the foreseeable future.  

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows overall downward movement. The gold proxy is currently trading at $119.61, up 0.13% from the open. Today’s predicted low is $118.52 (± 0.30) and the predicted high is $120.22 (± 0.30). The predicted close today is $119.40. Relative to today’s conditions, vector figures mostly oscillate between -0.41% and -0.20%.  



The U.S Navy’s missile strike in Syria, followed by a show of force to North Korea has put geopolitical worries front and center for most investors. Investors have turned to bonds for safety, which is driving yields down today. Bond prices and yields are inversely related to one another. Normally, President Trump’s pro-growth rhetoric and a normalization of monetary policy from the Fed would be pushing up yields. The current conditions have temporarily altered this, however. The yield on the 10-year Treasury note is down 1.39%, currently trading at  2.36%.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see consistent negative signals in our 10-day prediction window. Relative to today’s conditions, we see vector figures moving from -0.53% today to -0.77% in four trading sessions.  The ETF is currently priced at $121.54- up 0.69% from the open. The predicted close today is $120.20 with a low and high of $120.07 (± 0.27) and $121.93 (± 0.28), respectively.  



The CBOE Volatility Index (VIX) is currently up 7.30% from the open at 13.81. Relative to today’s conditions, the 10-day prediction window shows mixed movement with mostly negative signals. The predicted close today is 13.03 with a negative vector of -1.15%. Today’s predicted lows and highs are 11.57 (± 0.18) and 13.64 (± 0.21), respectively.


Other News

Federal Reserve Chairwoman Janet Yellen will be participating in a Q&A session at the University of Michigan today after the close. Her remarks are expected at 4:10 Eastern Time.

Swift Transportation Co. (SWFT) saw its shares climb today following an announced $6 billion merger plan with Knight Transportation Inc. (KNX). Swift’s stock is currently up 22.08% at $24.78, and Knight’s shares are up 12.69% at $34.92.

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