US Open – Time to pay the rent, TOPEC+ cuts will happen, Gold resumes safe-haven role, Bitcoin looks vulnerable

A new quarter, same stock market turmoil.  US stocks are poised to open sharply lower as Americans brace for a rough two weeks.  The death toll is about to skyrocket in the US and risk aversion appears like it will slowly start to wipe away last week’s historic rebound.  Last quarter was the worst first quarter on record for the Dow and it seems the overall negativity is going to keep the pressure on stocks.  Risk sentiment will not get any favors from any of the upcoming PMI readings or labor statistics.  Investors will likely remain fixated on how bad the daily COVID-19 updates get.

Now that President Trump’s historic $2 trillion stimulus bill is finalized, the clock is ticking for when Americans will receive their checks.  The first of the month is the time Americans pay the rent and serves as a reminder that many families and businesses are counting on the government to deliver their checks within the three weeks promised by Treasury Secretary Mnuchin.  Many experts would not be surprised if it took a little longer for the checks to arrive and that would be disastrous on so many levels.

Markets are looking very vulnerable as it seems the bear market rally calls are holding true.

Oil

A new quarter, same pain for oil.  It is going to be a painful few weeks for oil prices, as hopes for an immediate TOPEC+ (Texas, Russia, Saudi Arabia and the rest of OPEC) oil production cut agreement has faded.  Saudi Aramco’s oil supply jumped over 12 million barrels per day and Russia reiterated that are not planning to have talks with Saudi Arabia soon.  Russia did note they are not planning to increase production amid oversupply concerns and that could be why WTI crude is hanging onto the $20 level.

Mitigation efforts to slow the spread of the coronavirus will be intensified as the US brace for staggering rises in the number of cases and death toll.  With lockdown efforts likely to be pushed beyond May, demand destruction for oil could end up being 20-25 million bpd.  WTI crude is holding onto the $20 level for now, but that might serve as only a short-term bottom.

Right now, it is all about market share and oil prices will remain low over the next couple months as Russia and Saudi Arabia win it back from US shale.  At this rate, forced production cuts could happen as soon as next month as the feuding Russians and Saudis are filling up all the tank tops.  As storage prices surge, oil prices should start to test the mid-teens.  However, energy traders can’t rule out a TOPEC+ agreement just yet and that is probably why oil has not broken down again.

US oil companies appears like they will be the big loser as extended lower oil prices will mean lots of restructuring and bankruptcies in the Permian Basin.

Gold

Gold prices are rising as investors brace for a steady flow of ugly data that will get much worse and probably for a lot longer than what was initially expected.  Gold prices should rise as the virus spread is intensifying alongside lockdown efforts to mitigate it.  Gold prices should be supported as the impending global recession that is upon markets will be deeper and longer.  The path higher for gold however will be bumpy as steady central bank selling will likely occur as governments become desperate for raising cash.

Bitcoin

Bitcoin is selling off as risk aversion kicks off the new quarter.  Bitcoin mining is also taking a hit as the coronavirus pandemic disrupts supply chain for equipment has been disrupted.  If the new quarter brings upon markets a new wave of panic selling, Bitcoin may not hold $6000, and all eyes will be on whether it will retest the March 12th low of $3914.

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