Biggest 3-Day Rally In S&P 500 Since April 1933

Hello and good morning. It is Friday the 27th of March. Hope everyone is doing well. I'm not sure if you were based in the UK, but last night at 8 PM, the clap for the NHS. What an amazing service that these guys provide, and it was just amazing to see everyone given this unprecedented situation all coming together. So I hope that made you feel a little bit better that you're not on your own in self-isolation in that way. But yeah, absolutely, and thank you very much for all the well wishes from yesterday. I can't say that I went out and had a big birthday bash. It was probably the most unexciting birthday yet, but all good. As long as we're fit and healthy, that's all we can ask. But having a look then into the briefing this morning, and we come at it at a very interesting time, actually. And first of all, let's just recap what's happened and then we'll talk about what our views are going forward for the session ahead, because I think we're in for quite an interesting session to finish the week for sure. And this is the first graphic to the side of me, as you can see here. And what we're looking at here is chart of the S&P 500 year to date, and we're looking at the percentage fluctuation essentially. So here you can see on the axis on the left, 0, plus percentages, 5, 10%, negative 5, 10%. And you can see we started the year, obviously, even though we had things like the tensions in the Persian Gulf, we had the Phase 1 of the US-China trade deal, the coronavirus is certainly being the key the biggest market mover thus far, despite there being lots of macro themes that we've had to tackle in such a short period of time in Q1. And one of the things you can see here though was we're going through this pattern of massive big swings, big up days followed by big down days. But the last 3 days, in fact, if we look at the S&P 500, it's the first and best— was the best 3-day streak we've had in terms of percentage gains since 1933, April of that year. And let me just bring up the S&P chart here because I do think we need to talk about this a little bit, um, from that perspective. This is the, the chart, of course, from— that tells the story of the week. Uh, let me just bump it up a little bit so you can see all the details here. So you should be able to see that now. So you had the Fed obviously do their, their measures right at the beginning of the week, short-lived, but then the kind of rally, the US stimulus package looking like it was going to go through and ultimately did through the Senate. And then we had that biggest one-day rally we've seen in the best part of 80, 90 years. But if you actually look at the percentage move that we've gone throughout the week, it's pretty incredible. It doesn't look like a great deal on the chart here if you were ignoring the, the kind of price levels on the right-hand side. But if you take the actual low of the week to the high, we've we are up about over 21% at the high, from low to high. And we're still up, although we've come off a little bit, you know, still 19, 20%. So quite incredible really. And, you know, one of the obviously anomalies you could say from a theoretical point of view, we saw the jobless claims number come out of the US yesterday and the response in the market was a meaningful rally. You know, I for one been talking about this for a while I just thought, you know, it's been so overhyped. You know, obviously taking and looking at this objectively, it's not a good thing first and foremost. People losing, you know, a large amount of layoffs, then creating this massive spike initial jobless is not a good thing, obviously. But from a market's point of view, you know, a number into the 3 million wasn't as bad as expected, as strange as that sounds, and as record-breaking as that number was. You know, Citi was looking at 4 million. We were talking in the briefing about any downside catalysts in equities, you would need maybe 5+ million, and obviously that didn't materialize. And also I think that the accuracy of this data is going to be particularly bad. So I think for me, with Jobless, that figure alone really isn't what I'm looking at economically, and certainly I don't think central bankers— well, it's going to be, well, what do the subsequent weeks thereafter look like I think that's going to determine more what this overall kind of picture and how bad it's going to be and then the employment situation in America. So yeah, I mean, equities continue to bump higher and we found that, you know, we're trading a bit of a floor at the moment. You can see here if we look at the S&P 500 on a slightly longer timeframe to encapsulate going back to this 16th, then you can see we've got that range kind of high that we had that double double kind of top right on the 16th, 17th. We retested it and, and it worked well on the 25th, and then it's acted as a nice support area both in yesterday evening session and also first thing European morning. So I'd be looking at that as quite a key zone. These kind of levels have got marked up here, the kind of 49 to 40 type levels. Any break below there, I think, then could open up a more deeper move back to the 2500 handle if we were to get that today. Otherwise, I think then just playing that range accordingly. You've got the 26 handle, pretty much matches to the tick. You can see 01 was the high if we're looking at this near-term price range seen since Europe has come into the market. And then you've got the prevailing high that was seen from yesterday, which was up at 34.75 in the S&P. Um, having a look elsewhere because full of kind of stats today. Uh, gold is headed for its biggest weekly advance since 2008. Uh, let me see, let me just remove my video camera. It'll be easier for you guys to be able to see everything there. So just give me one second here, should be able to remove it. Okay, should be easier. So, so here we're looking at gold, uh, and again gold has seen a quite, quite phenomenal rally again you know, if we go from the beginning of the week type price movement, you're going from the 23rd up to the high, looking at a 13-14% rally. The price is coming up to find quite a natural point of resistance on the week, that being from the beginning of March, as you can see here on a slightly longer time frame looking at the year-to-date price action. But looking at where we are at the moment, again, similar pattern to kind of equities, seeing that bit of a bounce um, since they've come into the market. And you can see here I've got marked up with a few ellipses already, uh, these previous points of resistance that the gold market has found around this 1612 level, uh, in the futures. And if you overlay that then with the daily pivots today, you also have, uh, the 1609 is the S1 today. So again, I'll be keeping an eye with that range, kind of a similar play for gold as is the equity market. That's the downside key levels that I'd be looking at any flush through there, then I'd be eyeing at around the $1,600 level, which then starts to bring in— if I just mark it up, you've got that high here going back onto the 13th, these areas here as well on the 24th before that quite powerful move higher that we had. Um, so that's, that's gold. It is backing off a little bit though, uh, at the moment, uh, just given the extremity of the move that we've seen, uh, in yesterday's session. And again, just, just showing those big ranges in which these assets have been trading. With that, the dollar has, uh, is, is also been moving quite a bit. The dollar index headed for its biggest, biggest weekly retreat since 2009, obviously as the Fed have come in and offered more and more support. That in itself, although the Dixie trading a little firmer this morning, perhaps right for now a little bit of profit taking on those dollar shorts. But quite interestingly, from a cable perspective, we were talking about this yesterday when we were looking at the much bigger picture in sterling and how important a close back above that 1.20 was going to be. We're looking at the weekly chart here. If we looked to last night, we certainly did close above firmly that level. So I think that's quite a good signal for, for cable for the moment. And so I'd expect that 1.20 now to act as a pretty decent floor going forward. Uh, now we've managed to get above. As you can see here, it's such a substantial level of significance that we had on initial break, but now having got above there, it should work the same way. And here again, a really nice rally we've had over the last 24 hours to break that trend line we were looking at this time yesterday, and then taking out those previous highs seen midweek. And that's just helped to accelerate the price movement back on the upside. So as we pull back down I guess just going to be looking at these other levels as we were kind of rising yesterday as, as areas to kind of fade this move back down. EURUSD likewise, just given some of the dollar strengths we're now seeing, um, as I said, perhaps just a bit of profit taking on those, those dollar shorts, uh, then just resulting in a bit of a pullback for the euro currency first thing this morning. You've got that, those previous highs here kind of just around that pivot level probably an area to have a look at if we continue this trend around here. You can see that previous high as well here. If I just remove here, and then just following the move back down really, if the dollar continues to remain strong in these other areas, you can see quite a nice area where we've had support and resistance as we're, uh, initially you can test the break. Quite a strong candle there on the, the 90-minute I'm looking at here, so slightly higher time frame. And then for that bit of volatility through some of the initial data releases, but then another push up there. So that would be key levels to look at. So you've got the, that previous high on the 18th, the pivot, then you've got the 110 handle on that area there as well. I'd be watching if I was looking at EURUSD today. The crude market as well, just want to have a quick look because then we'll get stuck into some of the news. This, this chart actually remains completely, completely unaltered. This is exactly what we were looking at yesterday. I haven't touched anything here, but you can see what we were looking at was the respect here of this range, and hence the reason we got these rectangles. And then we'd already had marked up here to keep an eye on this, and it's pretty much what looked exactly timings-wise as we had marked out. Yeah, the initial break of that, that range low, the markets then come back up to that around that same area. And now I guess the question mark is we started to look a little heavy this morning albeit minor positive territory. But do we come back down? And if we do, then be eyeing that low on the 23rd, seeing how it reacts around that level. And potentially then, it depends what happens. If we see a bit of a spill-off into the weekend, equities come under a bit of pressure, I'd expect a fairly correlated move in oil. And then if we start breaking through some of these key levels on the reversal back in the S&P and other stock indices, with those breaks and these levels in the, the crude market I think definitely we could get back down there, but those, those dominoes would need to fall in that way in order to get that type of price movement, I would say. And again, I think rather than from a calendar point of view, I do think it's a bit more of a sentiment point of view. And I guess that does somewhat cue us up then for what we're looking out for for the day ahead. So let's have a look at the coronavirus. I'm just going to refresh this to make sure me just change over my screens. I just want to make sure that we're all up to speed. And one of the key things, of course, that people are talking about this morning is the fact that the United States of America now have more confirmed cases than anywhere else on the planet. So more than China, more than Italy. Now that might sound like quite a frightening prospect, but, you know, remember we were talking about this yesterday. It was inevitable the US was always going to supersede this. And I would expect that number in America in the coming week to probably get well into the hundreds of thousands. So that's not, I wouldn't say, on its own an immediate trigger to sell. But, you know, a couple of things here to, to think about. This is looking at the COVID-19 cases now surpassing China. Perhaps this makes it a little bit more clear. You're looking at a death rate certainly higher in China and a ratio point of view. But the idea here being that, um, China were very strict at looking to, uh, contain and delay, if you like, the, the virus, whereas the US has been fairly slow to that. Um, certainly starting to step up now. And, and definitely one thing I'd be looking out or conscious of going forward, particularly not just today but into next week, as these numbers will definitely go north. In America is further travel bans, further restrictions, kind of like what we've had now put into place in the UK, in mainland Europe. It's kind of more forced self-isolation, staying at home, only going out for emergencies, these types of measures. But being instead of just a New York issue or a San Francisco issue, it's going to be, you know, nationwide. And I do think that that is coming. And will that then create, you You know, the, the idea that there's going to be more layoffs than probably what's anticipated at the moment. You know, you think in the 3 million is bad, wait until you see the 5 million type numbers start coming in and on a consistent basis. These could all be things that could act as a trigger point then for another kind of renewed run on the downside because a lot of people still thinking that, well, you know, there's still a prospect here that we haven't quite found the magic formula yet in terms of whatever it takes from the government, the central banks. And I still think on the balance, from what I'm reading, sort of tipped on the more bearish side, I'd say, is still the prevailing theme for the time being. This is New York. Obviously, new cases in New York State have doubled in 5 days. So you can see the cases here stacking up pretty quickly. So that's what I'd be kind of looking at as well. As we've talked about before, these areas in New York, Madrid, and the UK are kind of the real hotspots. And then India as well. I mean, India, the numbers are still relatively low. We'll have a look at those in a second. But the RBI, much in a similar fashion to what other central banks like the RBA, the RBNZ, the Fed, the ECB, the Bank of England, have tried to get ahead of the curve. You know, that this economic implications of this are coming. It's just just a matter of time. So they've looked to basically unleash $50 billion worth of liquidity. They've slashed their interest rate. I think they cut it by 0.75%. So again, not unexpected. But India, obviously another key one to watch, is pretty much in that initial and then acceleration, just coming into the acceleration phase now. If you remember that kind of bell curve we were looking at yesterday, here's a a new COVID-19 visualizer that you might find useful. The numbers do correlate pretty well with the Johns Hopkins live monitor that we have been looking at, but one of the easier things to look at here is you can obviously— I can just pick where I want to go on the planet, and let's have a look at India. So India, you can see the numbers are still incredibly low at this point in time. So in terms of the actual amount of cases you know, less than, less than 700. But again, I'd expect that well into the hundreds of thousands, uh, unfortunately, in the coming weeks. Is India the kind of the key for trigger point for a renewed sell-off? No, I don't, I don't necessarily think so. I think America is much more important. You know, the more strict the quarantine measures that are put in place on a nationwide basis, the more impactful that's going to be on the economy, and therefore the more pressure I think that you could see on equities if that was going to be the case. But yeah, if we spin it over to the States, you can see here, uh, obviously these numbers on a day-by-day basis. Um, so this is looking at, I guess, the last day. Cases up about 170, deaths up 6 at the moment. Um, another thing that's— that was also, I thought, quite interesting, and I'll share these links with you if you're interested. This is a COVID-19 Global News Monitor. Now it's being done by a company called Ravenpack, and I remember talking to Ravenpack, I think it was back in maybe 2009, 2010. So this was quite immediately after the financial crisis, and obviously my job traditionally has been I basically monitor lots of different news services, and my ability is to then aggregate in quite a manual way through my experience and my knowledge, what I feel is going to be important for markets, to then relate to you guys as traders. So Raven Pack, what they wanted to do initially, just to give it a bit of context, is they wanted to make machine-readable news and basically wanted to replicate my process or my brain in terms of having a machine do it, in the idea that that could then outperform what we were doing as analysts on the desk. Didn't, didn't really take off. I remember Reuters running a machine readable service, and they were using a sentiment scoring system dependent on certain words and things like that. But obviously it's a tricky thing, and I'm sure one day some sort of AI bot will put me out of business, but I'm alive and kicking for now. And what, what was quite interesting here on this Global News Monitor was a few different things. You've got news flashes, so perhaps quite interesting because it aggregates a lot of different news sources, but specifically specifically talking about the coronavirus. So it can be quite useful to shortcut rather than going through all the different kind of press publications. But some other cool things they've got here are media exposure to coronavirus. The one I was quite interested in is not so much the case updates. I prefer to use the, the Johns Hopkins one for accuracy's sake because most of the mainstream media is using that as its benchmark. But here you've got something called the panic index. And I thought this was quite interesting actually. This was looking at basically, it creates a value range between 0 and 100, and it's looking at a percentage scoring. Then the higher the index, the more references to panic being found in it. Basically, it scours in kind of big data sense every single publication on the planet and how are they talking about the, the pandemic. And so just, I'll just been looking at trying to track these week-to-week kind of changes and fluctuations. And as you can see, as the markets rallied, the overall press obviously becomes a little bit more positive in that sense. You know, the— as we said, the S&P, the best 3-day rally since April of 1933. We had the Dow put in the best rally since a similar sort of timeframe on— when was it, midweek? So, but what what's happened here, we've had a little bit of an upturn now. And actually, if you look at it on a daily change, we're up about 3%. And I think if I was to backtest this, I'd probably say it's pretty similar going into a weekend. Typically it tends to make people a little bit nervous, particularly in a financial market sense. But also, if you think about it, people are not working from home, it's the weekend. The feeling is, I want to get out there, I want to you know, kind of the risks, if you like, of this kind of congregation of people and things like that, it probably accelerates, if anything. And so I'd say that does have an interesting read across then for financial markets, because if I start looking then at the general theme of things at the moment, I can't help but feel a little bit bearish, I'm afraid, in terms of how today might play out, because we've had such a phenomenal ride so far to the upside. And I was looking at a couple of different things here. This is looking on a daily on the S&P 500. A couple of, couple just technical signals perhaps to be aware of. One of these was yesterday we broke through 2552, and as you can see here, previously that was quite an interesting area going back to the earlier part. You remember that sell-off that we had when the Fed— obviously we, we were rallying super aggressive at the end of 2017 after Trump delivered the corporation tax cut. That started to have fears then of, you know, Trumpflation, Fed rate, multiple rate hikes, and then the markets sold off. And then remember that 200 DMA was working really nice through that period of 2017— well, really '16, '17, '18. But we've come back up then, coming to where we are at the moment. And the 50 DMA is about to cross to 200, so commonly known then as the death cross. So the opposite of the golden of what we saw on this occasion. If you look at the last time the death cross happened, we had that, um, I don't know if you remember, if you could cast your mind back, we had that kind of triple, triple top and it was kind of a descending trend line here, um, in that summer period. So let me just make this chart a little bit bigger so you can see everything I'm talking about. So it was here as an observation, and as soon as then on the third rejection the, the 50 DMA crossed the 200, we then had this really big move to the downside, which was then that low we saw going into Boxing Day of 2018 before that phenomenal rally on the bounce back. Well, yeah, now we've, we've managed to get back above there, and you can see the market's found a little bit of a footing here on the dailies. So far on the intraday, which was back to around those 18 lows. But upside equally, um, so far you got the Fib 382, which is from that, you know, huge sell-off that we've had from the all-time high printed, if you can believe it, literally about a month and a week ago. So 5 weeks ago, when we were trading up around close to 3,400, down to the low of where we have been printing. And so the Fib a little bit of resistance here to be aware of. The market, I think, will be looking at that because it's such a higher time frame. Everyone will be aware of it as well. So yeah, the— here then, how we finish today is going to be quite key where we are. I think if we can get back below this level, perhaps we start to trade a little heavy again. I think generally people tend to get a little bit apprehensive in these current conditions because the coronavirus numbers are only going to get worse. Over the weekend. And just given that in combination with how quickly we've run up in markets does make me feel a little bit, as I said, on the nervous side. But let's see, let's see how it plays out. On the calendar, what have we got? A few different things. The morning particularly quiet, it's not a great deal going on until we get into the US session. Remember, the UK clocks do change this weekend, so we'll be back to the normal time of— if you're in the UK, US data at 1:30 rather than 12:30, the normal 5 hours London-New York. So you've got the PCE, personal income spending, coming out this afternoon, 12:30. You've got the final Michigan numbers coming out this afternoon, and then the Baker Hughes rig count as well for any of those interested. You've got a couple of sovereign updates: Fitch on the UK, Moody's on Sweden, and Moody's on South Africa. And then if you're trading a fixed income market, just a reminder, you've got some futures expirations in the March contracts as well coming out, as well as in some of the commodities in gold, silver, and copper March futures as well. Um, so let me just switch over my, my screen. Sorry, this is the calendar for today I was just looking at. But yeah, nothing really too much to excite, I'd say, on the calendar. So I think it's going to be quite a key technical day I think it's going to be quite sentiment-driven. And my overall, as I've said and you probably have gathered, is that, you know, markets, it's unlikely, I think, that they're going to just remain continued positivity when we've outperformed so sharply. I mean, these are quite unprecedented measures so far. The Fed doing what it has done earlier in the week, the balance sheet of the Fed now is above $5 trillion, which is quite phenomenal when you think about it. Gold may be susceptible for a bit of a pullback, particularly as well if you get some of the, the booking of those profits on the dollar shorts. And that might then create a bit of a pullback in those major currency pairs where cable, for one, is completely outperformed as well when we're looking at that major pair. And then the combination, looking at those correlations between oil and equities, I think, could be quite key to play that out. All right, that is it. I'm gonna leave you and wish you a pleasant weekend. Uh, stay safe, and I'll see you on Monday. Thanks very much, guys.