Volatility Report: 25 April

Gains in oil and Nasdaq this week have been matched by falls in lean hogs and live cattle.

Oil rig Source: Bloomberg

The Risers

Brent

The rally in oil prices goes on, with Brent touching a new high for the year. The US has toughened its stance on Iran, announcing the end of sanctions waivers that allowed some countries to buy Iranian oil. Iranian output is expected to drop, but it is not yet clear whether OPEC will make up the difference. As a result, the steady 2019 rally in oil goes on, and pullbacks still look like possible buying opportunities.

Brent chart

Brent chart

Nasdaq

US earnings season is in full flow, and the evidence so far suggests that declines in corporate income have not been as bad as feared. As a result, tech stocks have rallied hard, and the Nasdaq has now surpassed the record high of 7687 seen in 2018. Further gains seem likely here, even if the summer months may see a short-term pullback.

Nasdaq chart

Nasdaq chart

The Fallers

Lean hogs

The African swine flu epidemic continues to sweep China, but for the time being the price of lean hogs has reversed. Having seen such a sharp rally it is not surprising that the price has dropped back, but if the price holds above 8500 then the overall break higher seems intact.

Lean hogs chart

Lean hogs chart

Live cattle

The sell-off is gathering pace for live cattle, with some liquidation of longs being amplified by the drop in hog prices. The rally from the lows of last summer has reversed, though the 11,450 level will be one to watch for possible support. A move back above 12,400 is needed to provide a more bullish view.

Live cattle chart

Live cattle chart


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