Investors looking to Yellen speech, U.S. data

Worries about the U.S. economy mean investors will be paying closer attention to Fed chair Janet Yellen’s mid-week speeches, says Prab Sagoo, associate director at Nasdaq Advisory Services, in his weekly market commentary.

Read: There are signs the U.S. is in recession again

Highlights:

• Domestic economic data is light this week, though Janet Yellen’s speeches mid-week will be closely followed ahead of some more notable U.S. economic releases on Friday. Chinese markets are closed all week, which should dampen some of the potential sources of global volatility. Read: Fed hike is a brave experiment
• The TSX remains range-bound and continues to experience technical resistance at its 50-day moving average. The index’s trajectory remains inextricably linked to movements in the price of the volatile oil commodity, which has a very significant bearing on the direction of the two heavyweights (energy and financials). Read: Commodities could strengthen in 2016, says expert
• Oil continues to operate in an oversupplied market and spent much of last week in the low-$30 range aided by an unexpected weakening of the U.S. dollar. Data indicated that speculators further slashed bullish bets on the U.S. dollar for a sixth straight week.
• But, the Canadian dollar took advantage of USD weakness and rallied back to the $0.73 level last week, having dropped to under $0.69 in mid-January. Read: Low loonie = opportunities for U.S. real estate
• And, the latest short interest data indicated the 6% gain experienced by the TSX in the second half of January was aided by some investors covering profitable short bets. However, it also showed bearishness remains with short bets against the iShares S&P/TSX 60 Index ETF rising to over 100 million shares. Shorts are at higher levels now than August 2015, when markets fell notably on Fed rate hike fears, a Chinese equity meltdown and commodities slump. Read: Why fund managers use derivatives

Staff

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