Big Tech Delivers On Earnings

Okay, very good morning to everyone. Hope you're doing well. It's Friday, 31st of July. I got the charts up to kick things off then following last night's mega tech cap earnings that came out. I'm sure you're semi-aware of how they performed so far, but I'm going to run through those in a bit more detail. Um, but gonna start off really just looking at the charts overall because we've got— dollar index has stabilized since it's pushed down in the overnight Asia-Pacific session, but it is down about 0.4%. That has created some fairly meaningful extensions of some of the moves that we've been seeing in the currency pairs in EURUSD and cable. So actually, let's just start there with the currency markets because with this continuation of dollar movement There was a momentary point yesterday where a little bit of a renewed focus perhaps on the COVID global situation, somewhat triggered by this initial signs of potentially a second wave forming in mainland Europe, made markets a little bit nervous. But since then, things have returned to trend almost, and now the Fed meeting almost seems like a distant memory. Some of that post movement we saw several hours after has been reversed, the dollar back on the back foot again. And so in the EURUSD pair I'm looking at here, it just continues to move back higher again. And a notable point that you'll see here in the futures, at least, we breached 1.19 now to the upside. And if I look on a weekly continuation chart, this is the one we've been watching quite closely, of course, over a number of weeks. And we've hit our objective now, which was around that 1.1893. So really key area. We were, we were talking about the psychological area of 1.18. There was this momentary hesitation about 2 days ago when we hit that initial move. Now we've gone up again, another point added, and to that 1.19, 1.1893 here, looking on a weekly chart in the euro. And we've, we've come up to that point. So, you know, really impressive run that's continued here for the euro, and predominantly led by the last 24 hours by an extension of dollar weakness more than euro strength. And that is then reflected in the, the dollar pairs because cable likewise has just continued its, its run. And I guess putting this on a daily continuation chart as well, there's not a great deal now of resistance for cable, but there is some meaningful resistance coming up, which is around the highs that we were printing just really before the whole pandemic really took hold. So this would have been in early March. That also encapsulated some of the price activity we had right at the beginning of the year. This is the, the kind of January highs. If we X out the actual price movement that we saw right at the first day of this year, we are coming up to year-to-date highs in the British pound against the dollar. So yeah, we're about 60, 70 pips or so away. But 132 now just seems a logical target for us to push up now. Any of these speculators just to squeeze it up into there. And that will be a stern level of resistance, I'm sure. And just interestingly, then you've got that 1.32 and you've got that 1.19 kind of area in the euro on that weekly chart, which goes all the way back to that previous level we were just looking at. So some, some big levels here that might well see a little bit of profit taking, or at least provide a bit of an upside cap to price activity should we continue on this trend at the moment of this narrative of of dollar weakness in the equity markets. Obviously, that's what we're going to talk about most because you can see this big jump higher overnight in the NASDAQ future, just wiping out then some of the, the losses that have been seen through the back end of last week and also in the, the prior morning session. And we can see that, that was the aftermarket move here. We'd exploded through the previous key level that we were looking at, which is today's pivot. So in actuality, it's quite an interesting level perhaps to keep an eye on today. You know, if we do run into a bit of somewhat fatigue here in this NASDAQ pop, then any move to the downside here would be quite a key area. That is actually— you can quite see it here— that's the pivot level with that previous high and low. And if I actually extend this chart out, you can just about see it here above my video feed. It's had a few other areas of significance from a point of resistance going back into the early and mid part of this month. So any pullbacks, that would be a really important area. Any further extensions, well then really we've got to get back above this overnight Asia-Pacific test at around that 10,920 to 10,930 area. And then if we did get a break, any further push, then you've got to look up to the, the all-time highs once again would be quite a bit higher. But not unattainable, of course. And that would be a key area. So 11,059 is the all-time high, which of course we, we retested back on the 21st and back on the 13th. So that's kind of the two key areas I'd be looking at in both bullish and bearish scenarios there. Also, just given the, the dollar weakness, you know, you know, the yields continuing to, to fall across the board really. And I was looking at the US 10-year and the Bund this morning And just looking here at the US 10-year, I've got a vertical line here showing everything right of that line being this year. So obviously a massive move that we saw when the pandemic was really taking hold, the response then in force from the central bank, the Federal Reserve. But interestingly here in the US 10-year, we've broken out of the top side of what was a fairly long-lasting several-month range, which was around 139.22. We tested but never managed to close above it, um, through the period at the beginning of the week until really we got to yesterday's session, which saw a more definitive close above. What actually came on Thursday, an extension yesterday. And so the upside now, we've, we've gone above 140. The US 10-year, uh, could well see a more, you know, just grind it out and yields remain um, further under pressure, pushing negative real yields lower. And of course then that meaning that, you know, this is all a supportive narrative in my mind to help gold. And with gold prices, if we have a look at there, you know, we, we've had two major attempts now. I'm looking at the gold future here of that $2,000 level. The first one came on the 28th, we've had another one on the 29th, and here we are two days later Uh, but in very close proximity, we're back within this morning about a $3.50 range of retesting that same level. Interestingly, if you look at the, the kind of size of the pullbacks that we've been having since we've hit these highs, um, let me just quickly update this so I can add a few more rectangles. So we had this first pullback here, which was violent. Um, I mean, it— we went from $2,000 pretty much to 75 $75 pullback all within the period of a session. We then had that second attempt and the pullback less severe. So we've gone from $75 to $50 type pullback and to where we are at the moment. And so, you know, coming off that rule of thumb then, and with— although it was broken slightly, this longer-term trend line I've been monitoring is that if we did get any pullback here in gold then perhaps we get the pullback to this type of area, or maybe down to the, the 1975. But just following that general rule of these ever more shallow pullbacks and the way that the dollar and US yields are shaping up, I do think that this test of 2000 could well come today. And just remember then how behavioral this market becomes. A lot of people obviously have got a bit of a gold obsession at the moment. And people will be monitoring and tracking this very closely. And if we start then, you know, knocking on this door today— if, and you know what, I'm going to talk about equities in my view because I think on the balance then, you know, we've had this big extension pop on the earnings that's now, you know, built into price. There is this Congress issue looming with a number of those unemployment, um, exceptional benefits coming to a closure, and it's looking like they're not going to get a deal done by the end of the day. So if we got that equity sell-off feeds then that continuation of trend of dollar movement and yield movement, then, you know, we might get a test, maybe we get a few tests, but then if we get the eventual break here, then that could well lead to quite an aggressive move then to see out the week. Whether or not we'd get a straight break or perhaps a break and a pullback and then a continuation on, definitely if gold in the right setup, you know, again, from a behavioral perspective, if we did firmly break $2,000, we could quite quickly see $2,010, $2,020 in, in quick succession. That's not to say that we'll close up that high, but just be mindful, if we get that break, things could get interesting very quickly. Albeit, you know, keep in mind we're up $24 or already. So again, talking about this, I do think there is a potential for that break to come today, but obviously those other assets have got to shape up in the right conditions. The underlying point here is that, look, even with the NASDAQ popping higher last night, which you think naturally then should be a risk positive, which should make gold in a logical sense come down, you know, gold's just playing its own tune at the moment. So there's nothing holding this market or being able to sustain this market lower at the moment. So I do think that break's coming. When it comes on that first time, when it really does break 2000, I think we're going to see a big spike through it. So, you know, just be, just be mindful of that. All right, let's get stuck into a final chart actually before I move on to the headlines and talk about these earnings. What— that was oil. I thought oil was really interesting yesterday. Because I just happened to be in conversation with a few people at the time, and it was Alex and I really talking to our traders, and we were saying about how— what could be the repercussion for oil. And the interesting conversation was coming because of this idea that the whole of mainland Europe could go back into a lockdown, and obviously that's going to have firm implications for then travel, and therefore the whole idea of consumption of these energy products, and i.e., oil, with no air travel in particular. And there was a really key area. Um, let me just zoom this out first and then I'll zoom it back in. But I've been looking, um, at that, that kind of 21 DMA has been a really good level. That's, that's been a good marker of supporting price, uh, over the course of really June and July. We did form a really important, uh, level which was on 10th of July, which was at 3854 in the futures. Now you can see going back to yesterday when we broke through the 21 DMA with a bit more force, this was when people were starting to panic a little bit about the global, global COVID worsening of the situation at the time. And we were pointing out a level, and I was sharing with the guys, you know, keep an eye on that 3854 because now we've technically broken through that 21 DMA with a bit more force. And the way of which the other assets were deteriorating at the time with the, the kind of theme around coronavirus, that, that in combination with the 50 DMA, uh, was exactly, you know, kind of all forming at around the same point. And we pretty much got there. We actually printed a low down at around 72, so we got into around, around a 15-cent range or so off that point. And then we saw a really wicked bounce back up by almost $1.50 off that level. So that's a really key area, um, you know, I know a few of the guys got hold of that as the rest of the market started to settle a little bit after initial push down. So, you know, good job on that front. But yeah, oil as well looking a little fragile, um, just given the fact that, you know, the OPEC deal is rolling. So by definition then, it's not due to last forever. And at the moment we've got a fairly precarious global demand situation with coronavirus seemingly getting worse at this point in time. So definitely warrants worth keeping an eye on. Um, yeah, that, that's kind of the main gist of things, but I want to quickly run through some of the headlines and get you up to speed with these earnings and what happened First of all, I guess I should inform you that there was some Chinese data overnight, not that really the markets responded to it, um, to any strong degree. That was the Chinese manufacturing PMI for July. It came in at 51.1. That was above expectations of 50.7. The non-manufacturing at 54.2 was actually a touch softer than expectations. As I said though, you know, I point these things out, it wasn't really a market-moving scenario. A quick look at these earnings then. Headline, you know, Apple, they basically have announced a 4-for-1 stock split. It's not unusual for Apple to do this. They have done this historically before. I think it was a few years ago they did a 7-to-1 stock split. So this comes of course after their shares have risen the best part of 80% for the year. They've confirmed the next iPhone will launch in a quote, a few weeks later than usual. Obviously people looking at the disruptions perhaps to the, uh, the supply chain just given the COVID situation. But a few weeks is not going to create too much nervousness amongst investors in this stock. Their third quarter revenue— again, Apple a bit different, they report Q3 rather than Q2— came in at $59.7 billion. That is a record figure and is sharply above expectations on the street for $52.3 billion. They're just going to run through the kind of main product mix and their services division, uh, just to give you a sense and context of how awesome these numbers really were. Revenue from the iPhone, $26.4 billion above the expected $21.3 billion. iPad revenues, $6.6 billion above the expected $5 billion. Mac brought in $7.1 billion. against the same quarter last year, $5.8 billion. Apple's wearable division, $6.5 billion above the expected $6.1 billion. And services, which includes things like the App Store, iCloud, Apple Music, things like that, $13.2 billion, uh, which was in line with street estimates but up from around $11.5 billion a year ago. So yeah, impressive numbers to say the least from Apple. And how did their shares perform in the aftermarket? Well, you've already seen the NASDAQ overall index. From a single stock perspective, Apple up about 6.5%, so huge move seen aftermarket for that stock price. For Facebook, uh, second quarter sales top estimates as ads rebound, and their second— the revenue rose 11%, $18.7 billion above the expected $17.3 Q3. They had 2.7 billion monthly active users. That was against an estimate of around 2.63 billion. So again, monthly users soaring as pandemic boosts the need for social media. And a lot of the company was talking about the fact that their main ad revenue from digital advertising comes from smaller, medium-sized businesses, and these are the ones that are using, or, this, this avenue more so now than ever given the the global pandemic. Facebook shares aftermarket, as you can see here, big reaction seen immediately, and they, they've held on to around 6.5% in aftermarket trade. So Apple and Facebook, the best part of a 6% gain. Amazon was an interesting one because obviously a lot of people were looking at that, just given as well they've, they've been the outperformer of the outperformers, if that makes sense. And they came out and had second quarter revenues jump 40%, 40% from a year earlier. $88.9 billion above expectations of $81.2 billion. Their earnings per share just knocked it out of the park. And their guidance as well, they gave guidance for the current quarter that we're now in, uh, and they said that it will range revenues between $87 to $93 billion. Um, that's against a Street estimate of $86.5 billion. So they're already leading us that the bar is going to be smashed from where current Street estimates are at this point in time. Operating income, and they anticipate to be in the range of $2 to $5 billion against a previous estimate around $3 billion. So yeah, super strong again overall in terms of Amazon. I did see as well yesterday, you might have seen me tweet, that Amazon now, at least in Britain that is, in in certain locations are going to be doing same-day delivery with a just a 2-hour turnaround in food delivery with Prime. I just think Amazon's just got it so sewn up at the moment. And it's interesting, as we were pointing out last week when we were talking about this massive outperformance of these mega-cap tech names, you know, is it justified? I mean, are these companies just better placed to deal with a current environment like this. Amazon kind of epitomizing that e-commerce behavioral shift, and then companies like Microsoft and Amazon, even Alphabet's cloud division, this whole working from home, new architecture to be able to work from home, all boosting these types of services. Things like Zoom, it's got to be hosted on one of these major cloud platforms, for example. So are they just better positioned? And, you know, and are they just— it's validated almost given what's been going on. But, you know, obviously these types of numbers will be hard to maintain forever. This is reflective of that period of shutdown. So obviously it's going to accelerate this. You know, Apple talking about the necessity and need for people to stay in touch with, with family and things like this. Increasing certain sales of different products. But the last one was— well, before I go on, Amazon aftermarket, I'm afraid they added only 5%. So yeah, a monster move aftermarket, but slightly shy of the 6, 6.5 from Apple and Facebook. Alphabet, a little bit different. Ad sales, which make up the bulk of, um, the sales at the Google parent, were $29.9 billion. Uh, that was actually down about 8.1% from the same period of last year. But Google, uh, their ad sales were picking back up, they said, at the end of the quarter. So they're kind of like, okay, that was not great, but things have started to pick up and actually it's looking a little bit more positive now we're underway into the next quarter. Um, growth at YouTube and Google's cloud business, the latter was up about 43%. From a year ago. So, you know, cloud computing is just booming at the moment. If you think about Microsoft numbers, they were up nearly 50%. Google's cloud business is growing nearly 40% on a year comparison basis. So those areas— YouTube, Google's cloud business— continue to remain particularly strong. However, aftermarket, how did they perform? Definitely not as good as those other names we were looking at. There was a little bit of volatility in the aftermarket trade. First positive, then negative, and they basically leveled out relatively flat with a moderate gain of just 0.5%. So not quite as good. But again, last night was a big almost risk for markets. I guess there was a little bit of apprehension that just given the massive outperformance in their share price, that perhaps it was kind of the bar was so high they were doomed to fail. It's almost far from it. They've just absolutely smashed the last quarter. So definitely keeps that, um, kind of supportive nature for equities at the moment. We've heard from the Fed, the Fed aren't doing anything anytime soon, so they're in ultra-accommodative mode. And then you've got these mega-cap tech earnings just absolutely busting out to the upside at the moment with their numbers. Stocks are going to go up, right? I mean, that's what you would assume. So definitely would keep an eye on the NASDAQ today. Remember we talked about those bullish bearish scenarios. I guess all things remaining equal and just what we've discussed here, you would have a long bias. But the risk of course comes through really this subject matter, which is something we've been talking about all week, which is the discussions on Capitol Hill, which is about the expiry of the $600 a week unemployment benefits. So getting you up to date with some of the latest commentary. Senate GOP efforts to pass an extension to the enhanced jobless benefits at a rate of $200 have failed. There were also comments from White House Chief of Staff Meadows said it was too late to avert a gap on unemployment insurance and that he was not even optimistic about getting that done next week. U.S. Treasury Secretary Steven Mnuchin said we're going back to negotiating table, and that the best-case scenario is that a deal is made in the next few days. But added, will take time to reach an unemployment deal. So, you know, that thing that we were saying was quite a big risk for markets actually looks like it might become a material impact. And as these headlines are kind of suggesting, this does put at risk the, the shape and severity of how bad the virus is going to impact the US economy. Because if there's a lot of people now who are going to go unemployed unemployed, or in fact even homeless, given some of the tenancy agreement extensions that are also lapsing at the end of this week. Yeah, that's going to be a bad situation. So a few things to weigh up here from a fundamental perspective. But, you know, the one thing I think that's more clear, I think either way, T-notes and gold, I feel, will, will be supported under these types of scenarios. Uh, the equity one, a little bit more of a judgment call, and I could understand people want to be long or short, but at the moment, um, you know, taking away that Congress issue, which is a bit— which is a considerable one, but the idea of the Fed having said what they've said, having seen yields and dollar perform the way that they have, and with these earnings performing like they are at the moment, when you think about the companies that reported last night pretty much a reflection of a quarter of the entire S&P 500. Well, you know, that's a, that's a pretty potent cocktail for, for the equity market. All right, quick look at the calendar for today. In the European morning, it's not too busy. We do have the European HICP flash, so the inflation numbers coming out for July. Worth keeping an eye. That's on 10 AM. That comes alongside the GDP flash preliminary number for Q2, which of course will be interesting. Um, then into the US afternoon, personal income spending, PCE numbers. You've also got the Chicago PMI and University of Michigan sentiment, but the final reading for July. And if an earnings perspective, you get a couple of the oil majors So ExxonMobil, Chevron reporting. You've also got Caterpillar, Merck, some of the other bigger names of interest coming out today pre-market. All right, that is it from me. So hopefully that was useful. Don't forget to like and subscribe to the channel if you haven't already done so. Really appreciate all the support in the community, and I wish you a fantastic weekend ahead. All right guys, take care.