Hold Your Horses on That Blue Wave

Written by: Edward Moya | OANDA

Hold your horses on that Blue Wave.  US stocks took a tumble after West Virginia Senator Joe Manchin said he would “absolutely not” support a new round of checks.  It seems the very red state of West Virginia will make life a lot harder in passing another economic relief package.  The S&P 500 index turned negative and the Russell 2000 Index tumbled 1%. 


Crude prices extended gains despite one of the bigger increases with rig counts.  The US oil rig count rose 8 to 275 rigs, the 7th straight weekly increase.  The stimulus roadblock by Senator Manchin did not disrupt oil’s move higher because the Saudis have taken away all concerns over the short-term crude demand outlook and as President-elect Biden has signaled, he will aim to deploy every available vaccine.  Stockpiling second doses won’t happen on his watch as he will do everything possible to ensure the production and distribution of COVID vaccines.  Money managers are heavily piling back into Brent as net-long positions rise to the most bullish in 11 months.    


Gold’s worst tumble in two months accelerated after Democratic Senator Manchin threw a wrench over the $2,000 stimulus checks.  It appears Biden might not really have a Blue Wave if Manchin stands by his strong opposition over a major relief package.  Gold can’t wait for the weekend to get here.  Gold should see some support at the $1800 level, but if that breaks, prices should easily retest the November lows around the $1780 level.


Bitcoin needed a trigger for some profit-taking and Senator Manchin’s threat to oppose any additional direct aid payments put a tentative end in the wild rally.  Bitcoin’s macro argument of a weaker dollar is taking a timeout now and that could pave the way for prices to consolidate here.  Bitcoin volatility will remain elevated as the one way direction of flows fuel the liquidity crunch.  Lower supply with relentless institutional and retail demand has doubled Bitcoin over the last month, but that could quickly reverse.

Related: Markets Surge Despite Unprecedented Violence at U.S. Capitol