FOMC Announcement, Big Tech Earnings, Jobs Report Highlight Next Week
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Welcome back to Market on Claws. Let’s continue our chat about commodities and Phil Streible back with us, chief market strategist. The Blue Line Futures two days to fill. All right, what’s up? Feel crude oil, continuing strength. I guess you could take a 24 hour victory lap. Well, crude oil looks fantastic. I mean, we had the breakout to the upside.
We took out the 200 day moving average. You know, if you look at the the current economic situation, I mean, everything looks great. We’ve got inflation starting to slow down. However, crude oil is going to creep up. Enter those prices eventually here. Saudi Arabia needs to be above $80 on Brant crude in order to balance our budget there.
Back over there. I mean, I think everything looks good here at the moment. All right. And it was down earlier today, too. So we’re like buying dips now in crude. That’s now that is news. So we were looking at that December contract, any kind of pull back into below that $73 long term support. We think that price action could continue to drive upwards.
Okay. Yesterday we talked about the potential for it to move. So we see the follow through. We talked about the supply side story starting to get baked in a little bit. So I guess when you see consumer spending still a hit and GDP hit two, that’s part of this, right? I mean, the US is just rocketing. Rolling. Yeah.
So that was the problem today with a lot of the other commodities, things like gold and silver was that and U.S. equities didn’t really have any sustained strength upwards because of the fact that you saw that consumer spending beating away the expectations. Everything else, the inflation data was slightly below what was expected, but if you get this spending continue to drive up, that really shows that the economy is quite robust.
Now, something that people are watching is that savings are back near these historic low levels and people are really going to debt right now. So I think that eventually that Federal Reserve is going to have to cut that debt burden by cutting interest rates. Okay. All right. If we do end up cutting this year, what does it matter most for in commodities?
I mean, I imagine we cut economy gets an extra boost. That’s probably good for crude. Do you think that right now the market has some of that? Like are there cuts priced into crude? We talk about it so much with stocks, talk about it with bonds. I think it’s factored in here, too. It is because when you start cutting interest rates, you get tailwinds on the economy.
The consumer is going to start to feel better. You know, things like their debt burdens are going to come down, they’re going have more disposable income that’s going to go out there. So it’s kind of a vicious cycle because if you do end up having a cut, you’re going to see all these commodities continue to rise like we saw when China they had announced they were going to cut the reserve ratio.
Well, we immediately saw an effect on things like copper and other outside commodities, things like that. They import dramatically. They’re one of the largest importers of crude oil. So that’s why prices have gone up. China right now is trying to fulfill long term needs because of the fact that we may have a political change, you know, towards the end of the year.
In the previous administration, the Trump administration was very hard on China and things like that. They had, you know, different sanctions and things like that involved. So they want to fulfill a lot of these needs right now at the moment. That’s why the demand is picking up. Okay. Looking at the market, generally, a little bit of softness going into next week when you’ve got the Fed alongside the earnings.
What do you think is the potential here for surprise in this market to kind of readjust expectations? Do you think it cares if we lose the cut in March, if we just push it back a month or two? Yeah, we’re we’re seeing like meh is where you got a 90% chance they’re going to cut rates. This March meeting is only going to be a 40% chance, 40 to 50% chance.
We don’t really have any data going into this thing other than what we saw today and this week. The big number is going to be looking at the jobs number towards the end of the week. You really need to take out those government jobs because that’s where they’ve been kind of padding the numbers. You want to look at the private sector, are they adding jobs?
And if you do get kind of a cooling labor market but you don’t get any significant deterioration, that’s where the soft landing comes into place. And I think that’s where you get the tailwind on US equities and things like that. Many of these US equities have broke out to the upside look fantastic at the moment. I think they continue the momentum higher.
Now somebody who does want to hedge their portfolio, they will look at buying an index, put about 5% below where these high water mark are at. And that’s kind of your line in the sand. If something’s going to drop, the shoe is going to drop, It’s going to protect you here and you got to have a small parachute like that.
So some will put parachute for next where you go. All right, come for the crude, Chad. Stick around for the train. A little bonus. Thanks, Phil, have a great weekend. You too. Still stable long futures. Let’s get back to our streaming conversation and give you the details–
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