Crude Oil Gains to Persist; Stocks to Stay on Their Rocket: Q3 Top Trading Opportunities

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Overview of Q3 Top Opportunities: Despite some twists and turns, the first half of the year was all about the growth story, and it appears that the melody will remain the same heading into 3Q’21.

The long-running bull market in US stocks is expected to continue in the second half of the year.

Energy should be in high demand as long as the global growth outlook stays positive.

The Growth Story Is Still Going Strong

Central banks remain accommodative even as they signal the end of crisis-era efforts; fiscal authorities continue to provide support, with more government spending increases expected from both Europe and North America; and rising vaccination rates, combined with the high efficacy of existing vaccines, suggest that the delta variant story is becoming a ‘wall of worry’ for markets to climb in the second hour.

S&P 500 Index in the United States (SPX) DAILY CHART TECHNICAL ANALYSIS (June 2019 to June 2021) (PHOTO 1) More of the market is ‘buying’ the story the Fed is’selling’ now that the runaway inflation narrative has been nipped in the bud (insofar as the Federal Reserve has been hammering the perception that price pressures are transitory, and now that supply chain pressures are easing, more of the market is ‘buying’ the story the Fed is’selling’). With the term structure of equity volatility indicating calm seas ahead, it’s probable we’re entering a phase best defined as a’slow crawl higher.’ The US S&P 500 and the US NASDAQ 100 both appear to be on a more favorable technical footing than most developed market (and emerging market) peers; the former is aiming for 4350, while the latter is aiming for 15220.CRUDE OIL (US OIL) TECHNICAL ANALYSIS: DAILY CHART (June 2019 to June 2021) (Picture 2) While the long copper/short gold pair trade makes thematic sense, recent alterations in the underlying background for copper make it a less feasible vehicle for expressing a pure growth view. With post-pandemic global demand surging, OPEC+’s announcement that production limits will be maintained keeps the near-term supply-demand mismatch as a plausible driver for further gains in crude oil prices. —- Christopher Vecchio, CFA, Senior Currency Strategist wrote this article./nRead More