Next Stop Recession?

Froddy

Member
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888
My (perhaps controversial) view here, chaps (don’t shoot the messenger), is this:
Current inflationary pressures are primarily driven by energy prices (crude and gas). However, crude is showing signs of Wyckoff distribution on the weekly chart (chart 1), and natural gas fell c. 20% last week (chart 2). Wheat (another massive commodity for everyday living) is also showing signs of Wyckoff distribution. Is it possible that inflation is topping, and that the real threat (a few months from now) will be stagflation due to an over-aggressive increase in interest rates?

As things stand, the structure of these charts is changing.

I’ll grab my coat …

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Wattie

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7,888
Interesting points.
Not my view Froddy re inflation topping (agree on stagflation).
I’m struggling to understand how increasing interest rates to 2% is gonna assist inflation at an (admitted) 8-10% +……..
 
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Harry

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615
I saw this on the BBC news website today. I knew fuel duty/vat was a large proportion of the cost of petrol, but I didn’t realise quite how much.
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MrMickS

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3,817
I saw this on the BBC news website today. I knew fuel duty/vat was a large proportion of the cost of petrol, but I didn’t realise quite how much.
What's more is that as the fuel price increases so does the VAT take. That 5p/l reduction in fuel duty has been more than made up for, in terms of government revenue, by the increased VAT. They could take another 5p/l off and still be in profit. So all of this, "we can't do anything because we don't have any money", isn't quite true.
 

williamsmix

Member
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158
What's more is that as the fuel price increases so does the VAT take. That 5p/l reduction in fuel duty has been more than made up for, in terms of government revenue, by the increased VAT. They could take another 5p/l off and still be in profit. So all of this, "we can't do anything because we don't have any money", isn't quite true.
Yes, I suppose the Treasury stands to do quite well out of general inflation with the VAT return increasing right across the basket of all essential goods, not just fuel. It’s a convenient stealth tax now it’s payback time for COVID.
 

midlifecrisis

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12,870
@Froddy using your skills and talent what do you think, and i stress 'think' oil and gas will do in the future? Granted, no one can predict this with any certainty but should we be looking at fixing our energy bills?
 

GeoffCapes

Centenary Club
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13,229
@Froddy using your skills and talent what do you think, and i stress 'think' oil and gas will do in the future? Granted, no one can predict this with any certainty but should we be looking at fixing our energy bills?
Wholesale energy (gas and electricity) prices are falling and have been since March, with the exception of the odd spike. See Below.

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The Forward price curves show a continued fall for electricity until winter 2026 (as far as my charts go) and winter 2028 for gas. See Below.

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Should you fix? Yes, would be my advice, purely because if you don't, and stick to a variable rate, you will be paying expensive prices now, and the element of the fall (which is coming) won't be taken into account.
Yes you could have short term pain, long term gain, but when the price cap is upped in a few months, there will be more pain.

We're advising our commercial clients to go with a 2 year fixed, and then the get a new contract in two years when prices are lower. Having a variable contract leave yourself open to spikes from anything from the war to politics, to malfunctions in important equipment.
 

Froddy

Member
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888
@Froddy using your skills and talent what do you think, and i stress 'think' oil and gas will do in the future? Granted, no one can predict this with any certainty but should we be looking at fixing our energy bills?
Natural gas is painting a very similar picture (see below) - both oil and gas are at "inflection points", or key decision areas. If price holds these key levels, and if we are witnessing Wyckoff distribution, this could go on for a bit longer with price trapped within a range before ultimately rolling over. Trouble is, we just don't know if or when that will happen.

Gas is 29 cents short of making a bearish engulfing candle on the monthly chart; crude would need to fall to 97.17 to achieve that. My bias is short for both, as there is clear bearish RSI divergence on both charts with no evidence of exhaustion as yet. The problem, however, lies with the fundamentals - price could just as easily rocket on news (or more OPEC + price fixing!).

So sorry - I haven't really answered your question because I have no idea what's going to happen, but thought I'd share what I'm seeing in the charts ...

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Froddy

Member
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888
Yes but meanwhile USD becomes stronger
My take on DXY (the $US index) is that it has completed a very bullish rounding bottom pattern on the weekly chart; however, it's at short-term exhaustion risk as price is sitting at the top of the Keltner Channels (the wavy blue lines), with evidence of bearish RSI divergence. The probabilities favour a reversion to the mean (the thick purple line) by way of short-term correction. Doesn't mean it's going to happen! ...

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MrRMB

Junior Member
Messages
50
My take on DXY (the $US index) is that it has completed a very bullish rounding bottom pattern on the weekly chart; however, it's at short-term exhaustion risk as price is sitting at the top of the Keltner Channels (the wavy blue lines), with evidence of bearish RSI divergence. The probabilities favour a reversion to the mean (the thick purple line) by way of short-term correction. Doesn't mean it's going to happen! ...

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That sounds interesting. Could you put that in plain English for Mr Thickie, here? Short or long term pain? Thanks
 

Froddy

Member
Messages
888
That sounds interesting. Could you put that in plain English for Mr Thickie, here? Short or long term pain? Thanks
Price rarely goes straight up or straight down - there are ebbs and flows to price action. At the moment the $US is sitting at an extended level, so is due a (short) pullback to catch its breath before (probably) resuming its journey to the upside. The chart is bullish, so long-term pain appears the more probable outcome.

However, there's a possibility that price is forming a double-top on the monthly chart (below). We are just one week away from the current monthly candle closing, and price has risen to a new high. This has the appearance of a bullish breakout. However, Big Money likes to play tricks in this rigged casino, so sometimes it marks up price to fool the trading public into buying on the breakout before taking the market lower. The mark up also takes out the stop losses of those who were short. This happened last month if you look at the preceding candle. This is a liquidity raid, which is another possibility. If price fails here, a "double top" will look likely, and this typically precedes a trend reversal.

Powell is testifying at 2.30 pm today - this is highly likely to cause volatility throughout the markets and may be a catalyst for a dollar continuation or, alternatively, retreat. The markets will be looking for any hint of policy shift or softening. The recent price action in crude and gas is clearly pertinent to the inflation narrative.

So, in answer to your question, my bias is towards a stronger dollar, but be aware of the potential for a retreat from its current level. We'll discover our fate very soon ...

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CatmanV2

Member
Messages
42,777
Price rarely goes straight up or straight down - there are ebbs and flows to price action. At the moment the $US is sitting at an extended level, so is due a (short) pullback to catch its breath before (probably) resuming its journey to the upside. The chart is bullish, so long-term pain appears the more probable outcome.

However, there's a possibility that price is forming a double-top on the monthly chart (below). We are just one week away from the current monthly candle closing, and price has risen to a new high. This has the appearance of a bullish breakout. However, Big Money likes to play tricks in this rigged casino, so sometimes it marks up price to fool the trading public into buying on the breakout before taking the market lower. The mark up also takes out the stop losses of those who were short. This happened last month if you look at the preceding candle. This is a liquidity raid, which is another possibility. If price fails here, a "double top" will look likely, and this typically precedes a trend reversal.

Powell is testifying at 2.30 pm today - this is highly likely to cause volatility throughout the markets and may be a catalyst for a dollar continuation or, alternatively, retreat. The markets will be looking for any hint of policy shift or softening. The recent price action in crude and gas is clearly pertinent to the inflation narrative.

So, in answer to your question, my bias is towards a stronger dollar, but be aware of the potential for a retreat from its current level. We'll discover our fate very soon ...

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Thanks for clarifying ;)

C