Biden Set To Claim Election Victory But Virus Cases Continue To Rise In The US

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at Amplify Trading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin. Okay, very good morning, happy Friday the 6th of November, I hope you're doing well. I'm just going to have a quick look at the markets this morning at the European Open, go over some of the major news stories and just what's in store for the session ahead. We do have things like obviously looking out to confirm whether or not Joe Biden becomes US president as soon as today. What are the mathematics behind that and the probabilities of that happening? And then subsequent market reactions. Then also got nonfarm payrolls out. We can talk about the Fed as well that came out last night and a bit of an update on the COVID-19 situation. Situation, particularly in the US. So just having a look at markets this morning, and soon as Europe has come in, we've seen a little bit of a reversal actually of what we had in the Asia-Pacific session. So starting off in chronological order, we finished in positive territory on Wall Street, gains of just shy of 2% in both the S&P and Dow, and the NASDAQ was up 2.5%. So some really sharp gains that have been seen really since Tuesday night. on the confirmation of, as we've discussed many times this week, the fact that a Biden win but with a split Congress and what that means then for the inability to do any major tax hikes or regulatory changes. And so some of those sectors that were at risk of being impeded by that have outperformed generally on the week. So just having a look then at equities first, because I've still got some markups here from the various charts that I was talking to the guys in Amplify Live yesterday. And our general expectations on markets were just given the fact and how quickly and how far we've risen since the election in itself, that a little bit of profit taking would probably be of the order from around these elevated levels, particularly as we go into the end of the trading week. And these rectangles here are unaltered from those discussions from yesterday afternoon. And basically we were just looking at areas of which, if any pullback, we would find some decent levels of support, and perhaps even lower down then a good level to reinitiate long positions. And, uh, the market already responding really in the overnight Asia-Pacific session. In Europe, just bumping the S&P future back above its pivot level, uh, that being the high that we had on the late afternoon UK time on the 4th, uh, breakthrough in yesterday's session. We're just, uh, finding some support around that level. A really strong level further down, if that was to be seen anytime in the near future, 34, 28 and a quarter. As you can see here, prior resistance and support would be another area of interest as well for any of those more looking to follow the trend and just of any short-term profit taking, look to re-enter into a long position. The NASDAQ is almost even more evident in terms of the acceleration. Of course, the mega-cap tech stocks have really shot higher ever since the, the election results. So the likes of Amazon, Apple, Facebook, those familiar names of course. And just looking here on the near-term chart, you can see these, these again, these levels we were marking up yesterday. So the previous breach and move higher that we saw in the overnight session on the 5th, and then providing a bit of a platform before Europe came in and lifted it yesterday morning now providing some support, and we've just pushed back up to, to pivot. On the daily chart, uh, the trend line— the master of all trend lines, Sam North, uh, was looking at this, uh, obviously yesterday. And just going back to where we were from the 2nd of September, where we really were just steaming higher in US equities, we had a retest of that back in mid-October, and then pretty much to the tick in yesterday's session before just backing off. So a nice kind of logical target there for the, the NASDAQ on what has been such an explosive move since really midweek. When you, when you look at it going back to, uh, the 3rd, we've risen some 10% or so approximately in the NASDAQ. So again, just a nice technical target for, for many people just to take some off as we get to that point. So kind of similar-ish to, to what we've been talking about over the last session or so. The idea that, you know, directionally, don't really see too much reason for it not to change. We'll talk about the election side of things in a moment. As far as the Fed was concerned last night, there's really nothing to, to talk about, to be quite frank. Everything was in line with expectations. No change to the interest rate, no change to the asset purchases. The results of the election, congressional elections, remain somewhat uncertain. Powell stressed the economy needs more fiscal and monetary policy support, warned about the mounting coronavirus infections rates that they're causing a significant risk to the economy. Nothing untoward. Let the price action be your guide. You can see from that, over that initial release, that there wasn't really any immediate reaction to it. That then leads us on to a couple of other things. But before I do that, quick look over the rest of the charts. The Dixie uh, just a softening up a touch as Europe has come in. That's just helped these major pairs here in EURUSD and Cable. Uh, just maybe worth putting a trend line there from those short-term price highs that we've had. We're pretty much right out there at the moment. You can see in the EURUSD pair, and around that same proximity of that level starts to incorporate then the highs that were seen when the price was rejected around 1.1850 type area in the euro futures. Sterling holding up. I mean, Brexit really is a moot point at this particular juncture. I don't think the market is particularly sensitive to what's going on there despite the evident impasse at the moment. It is to be expected, just the way that negotiations have been playing out with that particular subject. So still very much be looking at these major pairs for really directions are coming from the US dollar. And the DXY is trading close to a double bottom, uh, at the moment, uh, at around the kind of 92.50 type area. So worth keeping an eye on that. With the dollar softening up, gold's moving higher, so that relationship remains pretty solid for the time being. And gold saw obviously a real punch higher in yesterday's session. We were looking on the 1 20-minute candlestick chart. So again, that rectangle there providing a nice area, uh, technically, because when we broke, we saw the acceleration to push on through really the high 40s all the way up to around 55. On the pullback we've seen in the overnight Asia-Pacific session, that same area or zone providing another technical point of turn for the price action. And we've just started to push back up here as the dollar's just softening up again. If we come back up to retest yesterday's intraday high 54s, then technically not a great deal of obstacles till we get a bit further up to around 1963 on the upside. So let's just keep an eye there as well. WTI crude, a little bit of a pickup as Europe has come in and what— and just reversing really a bulk of the Asia-Pacific session. Uh, doesn't look particularly too interesting at these levels at the moment. We're kind of almost at the, uh, from that S2 bounce that we we've seen was around the bottom end of the range that we've been trading for the last couple of days. A little bit more indirect move comparative to what really has been, I'd say, more of an investor focus, which has been the equity market, which has kind of saturated all the attention and really dictated a lot of the intraday sentiment for the time being. Just having a look then at some of the stories and what's going on. So let me give you an update on what the latest is with Biden. Was still getting a few questions yesterday about now, what is the situation? Has Biden won? Can Trump still win this? So let me run you through some of the stats. Trump's lead in Georgia has dwindled to about 1,775 votes as of last night, while his lead in Pennsylvania was down to about 24,000. And Biden has expanded his lead in Nevada now to over 11,000. The idea being here is that the stuff that needs to be tabulated at this point in time tends to be mail-in votes, and obviously those tend to favor Biden over Trump. So if anything, any leads that Trump have had are diminishing, any gains like in Nevada that Biden has had are expanding. If Biden holds Arizona, any of Nevada, Pennsylvania, or Georgia would put him over the threshold for victory, and Pennsylvania would do so regardless of Arizona given how large an electoral College, Pennsylvania is. Full unofficial results are expected in Pennsylvania and Georgia early today, so European afternoon time, so East Coast morning for Friday. It's not clear how long Arizona will take, while Nevada said the bulk of its ballots will be processed by Sunday, but the final count won't come before November 12th. But remember, Nevada's pretty small. I think it's around 6 Electoral College votes. So if Pennsylvania comes in and that flips against Trump, which he is at the moment in the lead, then that would be game over. So basically, when you kind of mathematically calculate it, the probability of Trump pulling this off now is, is incredibly small. So it's pretty much all but done for Biden. In terms of the legal side of things, I'd expect that to probably continue for the next week or so, perhaps even longer. But ultimately, I don't really think there's much chance here for, for Trump to, to turn much around from a legal perspective. I was looking back to 2000 when we had obviously Bush and Al Gore. There are kind of different state rules, but generally speaking, when a vote is particularly close, then it can go into automatic recount. It can then be contested through the courts to be recounted again, and then it can be taken up to the Supreme Court. This is what happened in Miami in 2000 for Bush. I think originally he was ahead by about 1,800 votes, went to recount, it dropped to 900, and then it went to the US Supreme Court and they actually gave him victory by just under 600 votes in the end. But as you can tell from those numbers, way more closer than what currently would be the lead for Biden in a number of areas, and, and the opposite in regards to Trump. So I really don't think this legal side of things is going to carry much kind of weight. And I think that's pretty evident from the way of which markets reacted in the last couple of days. If there was any credible substance to markets thinking, well, even if Biden wins, if Trump can flip it in the courts, then I think you'd be seeing this play out a little bit more negative in what markets are behaving at the moment. And that's, that's not been the case. So yeah, I'm sure he's not going to go away quietly though. As you would anticipate. So yeah, this is what it looks like. I mean, when I was just explaining through those areas, so as you can see here, Nevada, yep, 6. Um, you've got Pennsylvania, North Carolina, Georgia, some of these still to be confirmed. Pennsylvania obviously being the biggest of the bunch of those key swing states to keep an eye on, and that could come in terms of those results, Pennsylvania and Georgia, in just a few hours' time. And that could then be a slam dunk for Biden. The Fed, as I said, yeah, really not a great deal for me to talk about. The virus to weigh on economy poses considerable risks and more pressure on fiscal stimulus was all very much of the order. On the COVID side though, I did want to talk about this. This is the latest kind of heat map, which reflects then where are the hotspots for COVID-19 confirmed cases. And this is looking at the average daily cases per 100,000 people in the last week. And the more red, obviously, the more cases that have been happening. And so here you can see definitely the Midwest, which has been, of course, the focal point of the last probably 3 weeks in terms of the outbreak of the virus, and, and perhaps even played into then a lot of this election outcome, given the balance of power very much on that area. In the Midwest—Ohio, Michigan, Wisconsin, and so on—that predominantly have gone against Trump. But daily US cases edging toward 100,000. Some numbers that I've read are already above that figure. Illinois, Ohio, and Michigan among those states reporting record infections as of yesterday. New York on the East Coast worth keeping an eye on as well. They're running at their highest level in 6 months now. Hospitalizations are also increasing, approaching the peaks in April and in the summer. But at this point, the death toll does remain relatively low. But the way that these numbers tend to play out then is that if these numbers continue to soar as they have been, hospitalizations continue to increase, obviously maximum capacity levels there would be a concern. And then subsequently, death toll does tend to rise at some point or another. Obviously, at this point, there hasn't been much conversation about what is the US going to do in order to start to at least counteract this. And that's because attention's just been so politically focused on the election. All the meanwhile, this is getting materially worse. And so I definitely think that this is going to be something which markets will have to digest in the coming weeks when ultimately some course of action is going to need needs to take place, uh, just given the, uh, the current situation that's happening in particularly in North America, which the markets are most sensitive to. Uh, on the COVID side, uh, a vaccine update. Um, AstraZeneca coronavirus shot could be ready for large-scale vaccinations as early as this year, according to their CEO, dismissing reports of delays in production snags. Um, they say that the FDA may wait for US data to approve the shot. So yeah, it's a tough one to kind of interpret. Obviously the politicians are the least to be believed when it comes to timelines due to vaccines. The CEO of a major pharmaceutical company is a slightly different matter. Astra definitely one of the front runners with obviously Oxford University in terms of getting a COVID vaccine out there. On track for year end seems a little bit punchy and perhaps press agencies just jumping, trying to make a sensational headline on what was actually said. So I don't think there's really too much to read into this at the moment, but obviously, just given what I've been saying, I think first point of order is you've got to be keeping an eye on the COVID situation and then subsequent government action to control this, whether that's in the US or mainland Europe and beyond, and then the vaccine, obviously, is comes the secondary phase. It's going to determine really, uh, the economic outlook going forward for the next 6 to 12 months. Quick look at the calendar and what's in store for today. And we've already had the German figure come out earlier, so industrial output. Let me just get you up to speed. Uh, that came in at 1.6%, slightly better expected 2.7%. So German data at the moment kind of treading water, but the understanding here is that things are likely to deteriorate in those kind of macroeconomic figures just going forward. And hence the reason why market expectation is very much built in for the ECB to deliver more in a couple weeks' time at their end-of-year meeting, topping up the PEP by €500 billion. Otherwise, looking at the calendar, what else is there? Obviously, the main focal point of the day is going to be non-farm payrolls. Quick look at that then. This is the normal trader kind of crib sheet. I did share this in the Amplified live chat last night. I always do, I always like to prepare for these major data events, but ultimately I think from a more top level, what are markets focused on right now and what are markets most sensitive to and what could then dictate the overall general direction in markets today, I don't think it's non-farm payrolls. Kind of a similar situation to the Fed, um, with payrolls. It's more than likely that the jobs basically is continuing to slow down in terms of job creation, albeit there is a headline expectation of 700,000 jobs being created. The range on the low, 500,000 to a high of 1 million. The unemployment rate is expected to come in at 7.7%, which is a slight decline on 7.9% previous. But I think overall, a lack of stimulus obviously is going to be problematic for this figure going forward. As I said, the COVID situation is getting worse at this current point in time, which will probably likely require some form of restrictions at some point, and that's going to also impede the kind of economic recovery that had been in place. So yeah, non-farm payrolls, definitely the guys, myself, will give you the full rundown near the time. We'll go through, plan it out, what could happen, key levels of where we're trading at that time. But overall, I don't think beyond then, just the moment of its release, it's a particularly big deal, to be quite honest with you. Otherwise, other than that, there's not a great deal else. Um, so obviously the election side of things, looking out for confirmation on that, uh, just still keeping a half an eye on the COVID situation. But I'd say still the dominating factor is just the way that markets have been behaving under the scenario of Biden with the split Congress and what that means for policy going forward, and then the type of equity reaction that we've seen. So I guess today the equity markets going to European open have found a little bit of a flaw, as I said, in those, those technical levels. Uh, the euro on that trend line, cables up here in the center top chart retesting up and around its highs, as the DXY sits right on quite a key level at the moment, which would be a breach of that double bottom that really defined yesterday's price action. So again, it wouldn't be too unsurprising to see a bit of a rerun if that dollar does break both pairs with the breaking cable on the high and that trend line in euro and through yesterday's high, we could see a bit of an extension on these moves. Uh, and then really, I guess, gotta wait for the North American entrance for the open on NYSE to see if we can punch higher or not in this equity move, having already faded it a little bit in the Asia-Pacific session. Does that just give more reason for another push higher? I guess we'll see. The final thing I just wanted to say is Don't forget to subscribe to the YouTube channel if you're watching this video there. Tim Duggan, one of our senior traders, he did a really great video, the first episode of a series of 3 that he's doing on trading psychology, and he dropped the last one not this weekend gone, the one before, but he's going to put out episode 2 on Saturday. It's being recorded today, so don't forget to subscribe and check that out. I'm sure you'll find it interesting. Otherwise, take care, wrap up, keep warm, stay out of harm's way, and have a great weekend. Thanks, guys.