Mid-Market Update: Stocks appear bulletproof for now, Oil whipsaws after EIA report, Gold consolidates

The longer-term perspective argument, that stocks will be much higher in the years to come, continues to see equity inflows provide some support in today’s rally.  The stock market rally of the past few weeks has been done in four phases: The first phase was the monetary policy actions by the Fed and friends, the second was the fiscal response, the third one is the optimism that the virus is peaking in global hot spots, and fourth driver is speculation the US economy could reopen within 4-8 weeks.

Considering how slow China’s recovering is becoming, it is hard to argue that the US and European economies will recover quickly.  If China is only halfway back up and running, patience will be needed to see how the rest of the world will turn out.  Europe is a few weeks behind China, and the US is a couple weeks behind Europe.  The next few weeks will provide further clarity on how bad will this global recession become and that should eventually derail this weakening stock market rally.  The fiscal and stimulus responses have been strong in the US, but the implementation and shortfalls will likely see a good part of the economy remain in shambles.  The current risk-on rally may continue another day or week, but ultimately if this market crisis plays out like the others, a massive selloff should be brewing.  A W-bottom could play out and stocks over the next few weeks could see a retest of the March 23 lows. 


Oil prices are settling around the middle of its two-week range.  Oil prices are well off the session highs after the weekly EIA report showed inventories delivered a 15.2-million-barrel build verse an estimated build of 9.7 million barrels.  Crude exports plummeted 10% as coronavirus lockdowns continue to destroy demand. The largest build since 1982 will put some pressure on oil prices, but also on US shale as storage capacity concerns will force them to limit output.   

Oil prices are still fairly supported ahead of the upcoming OPEC members and allied producers meeting.  While everything on the demand side of the equation for oil prices screams for prints well below $20 a barrel, with global storage tank capacity nearly reached, nobody wants to be short ahead of Thursday’s meeting.  Expectations are growing for the OPEC ++ meeting to be a “buy the rumor, sell the news” event.  Russian might talk a big game, but they desperately want production cuts to be shared across the board.  Russia oil is pipelined constrained, roughly thousands of miles, and they run the risk of their tight reservoirs getting shutdown and never coming back.  Russia should not be the difficult player in tomorrow’s meeting, that role will fall on the US.  The US has dominated production over the last decade, more than doubling production while the Russians and Saudis have posted modest gains.  The last three years of OPEC + production cuts pretty much saw the US take almost 5 million barrels of market share.  The base case is still that a deal will get done or that talks will be extended, and that is pretty much only thing keeping oil prices supported. 


Gold prices appear to be consolidating as investors ponder how much longer can the stimulus trade keep risky assets supported.  Some optimism is brewing on that many countries have started flattening their coronavirus curves, but it will be a couple more weeks before we can see if any plateaus are short-lived. 

Gold is still the preferred metal of choice, but that will start to change once confidence grows that the economy will reopen.  Gold in the short-term could outperform against silver and copper but that should change if the coronavirus outbreak in the US begins to turn around after a terrible week for deaths. 

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023.

His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.