Boris Johnson to face the music

Okay, good morning. Welcome, Amplified Traders. It's just past 8 o'clock on Wednesday, 25th of September. I hope you can see me and hear me clearly. My name is Will DeLucy. I'll be giving you the briefing and overview this morning of what to expect on the markets for the day ahead. And well, what a, what a time in history in which we live. Phenomenally interesting, uh, not only in UK politics, um, but in, in global politics as well. And finally looking like it's actually beginning to impact financial markets. So just going to give you an overview of some of the, the main themes to look out for today, and then we'll look at the, the data ahead. Obviously the first headline is really on the Supreme Court decision Hugely fascinating to watch. That is forcing Boris Johnson now to— well, he's probably just landing, flying back from New York to attend Parliament today. It's being opened by Jacob Rees-Mogg at 11:30, and this is of course because it was decided by the highest court in the land in the UK that the long delay forced on Parliament known as proroguing Parliament, actually, in her exact words, didn't even happen. It was as if they had a blank piece of paper. There was no proroguement of Parliament. That did not happen. It did not exist. And therefore Parliament must reconvene immediately, which is today. This is hugely embarrassing for Boris Johnson and the advice that he received. I mean, I can He must be absolutely furious. So the two main advisors he's got obviously are Cummings, who was the engine behind the Vote Leave in terms of his sort of strategy to advise Johnson to do this, and also then actually it was someone called Geoffrey Cox, who was a barrister, who was Johnson's legal advisor, who legally advised Johnson that this was in fact lawful and he could make this decision to prorogue Parliament. So there's definitely more than egg on the face, uh, of the Conservative Party at the moment. I mean, it really throws, throws the whole thing into— throws the whole thing into uncertainty. And you can see this by the pound, just looking at how the pound has reacted and what's happening now. Because you might think, well, hold on a minute, when that really began to come through, the pound initially was supported. And here, um, you know, we pushed through R1. We had a sort of continued trend higher yesterday initially, but now when you think about it, what does this actually mean for the pound? Well, it's, it's still just a huge amount more uncertainty, unfortunately, because more than likely now there will be a request for an extension of the Brexit deadline. Of course, Boris Johnson can say, um, that that's not what he wanted and therefore try and hold on to some of the Brexit votes. I mean, Remember, the Conservative strategy here by this, you know, replacement of pretty much every major MP to make it look very similar to the Vote Leave party was to try and take away the votes from the Brexit Party, who had one clear message. So Boris Johnson will still be able to say this is absolutely not what he wanted and try and hold on to some of those Brexit votes. But If we go to a general election at the moment, it's very uncertain to say what will happen. We've just seen on the news, art-wise now actually, UK leader Corbyn declines to say when he will put forward a vote of no confidence in PM Johnson. And this is just a huge amount uncertainty on either side. The Conservative Party have significant turmoil internally. The Labour Party, really, Corbyn has, I think, been saved somewhat by the Supreme Court decision, um, on his conference in Brighton that was already looking like a bit of a pickle, to, to put it mildly. So not actually that clear on, on where the pound is going to go short term. So be very, very careful. Um, absolutely it's going to be news-driven, so staying in touch with this desk and staying all over your Twitter feed, um, onto your TweetDeck is going to be of crucial importance. It's not only in the pound, but as I'll explain as we go through this market meeting, it's really in a lot of assets now. I think we're, we're quite finely poised in, in making a decision, and that's because of the huge uncertainty we've got in geopolitics. I've talked about Brexit already. Just one last point on, on, on Brexit. I mean, obviously we'll be tuned in at 11:30 on the reopening of Parliament this morning. But it's also in the US, and we saw in the US a lot of uncertainty now coming from the potential impeachment of the US president. I'll talk about that in the moment. And then the, the whipsaw of really how markets have been moving, buffered by both positive and negative geopolitical news. So let's explore that and what it means for your trading decisions going ahead. So last one on the pound in terms of uncertainty, what does it mean for the Bank of England rate cut? One of the things that you have to understand with the pound is you've got, you know, 2 or 3 things going on all at the same time. Yes, you've got the turmoil within the Conservative Party, the Labour Party, obviously whether there's a vote of no confidence or not, whether there's an extension, when there will be a general election, and you've got to try and make your own own opinion of what's going to happen there. But also, don't forget, you must always consider what's going on with the Bank of England. The Bank of England make their next interest rate decision on November the 7th, just after the original Halloween date— well, the, the postponed Brexit deadline, October the 31st. The more the uncertainty goes on, if there is a further delay in Brexit, which it looks like there is likely to be, This will continue the uncertainty over the UK economy, which will therefore put more pressure on the Bank of England to cut interest rates on November 7th. So it's not a one-way street, this delay on Brexit being good for the pound, because you've got to try and think, what are the Bank of England going to do should there be a continuation of this sort of purgatory in which we are in without a clear decision being made? That means actually the Bank of England will be adding to the list of joining the race to the bottom. Those of you who were trading with us all the way back in 2011, you might remember the main theme of that year was something called currency wars. Well, there was a lot going on in 2011, actually, but one of the themes was currency wars, in that central banks seemed to be cutting to achieve a race to the bottom in order to have the weakest currency in order to facilitate their global growth out of the recession by relying on exports. It seems like we might be getting there again. If the pound now cuts rates, you've obviously got further dovishness coming out of the ECB, as confirmed by Draghi. You've got definite dovishness now coming out of the Federal Reserve, and we expect, you know, at least 0.5% further cuts out of the US. And remember, the Treasury State Department— so that's the Fed, uh, control interest rates, but it's actually the State Department that control the dollar. Through the Treasury. So you must keep in mind the, the tweets from Donald Trump and the impact that they can have. Um, so we're in this situation where we have a seesaw, I would say, of, of, of global events. And yesterday I think was a perfect example of it. So if we look at the S&P yesterday, I'm just going to go to a 15-minute chart here. If we look at the S&P yesterday, look, we're grinding sideways pretty much, but we started the day having a pop higher all the way, really close to these record highs. 3,012 in the S&P being reached, not far away really from, from the all-time highs in the S&P. Very buoyant mood starting the overnight session, and that was because of conciliatory tones coming out of China that they're going to reduce or review the tariffs on soybeans. And one of the reasons why stocks can't sell off at the moment, or find it hard to sell off, is don't forget in October we've got the meeting between Donald Trump and President Xi Jinping where expectations are so low on what can get agreed here, any type of traction in any type of way is likely to support risk assets. And all of the traders have this in the back of their mind. As long as that October meeting between the US and China has not yet happened, it does have a potential to provide a boost behind risk assets because any type of positive news will be received as risk-on. Really interesting discussion in the Financial Times, however, today. Are we past the point of no return? And what that means is you saw Chinese data out over the last few days, you've seen German data out yesterday, IFO survey absolutely appalling data coming out of the IFO survey. If I just show you that chart here, um, let me just transition so you can see. Yeah, here's the IFO chart coming out of Germany. All right, the IFO was actually, believe it or not, the one silver lining of the cloud of economic data that we had yesterday. But looking at the trend here of IFO, you can see it's not looking good in Germany. We had poor consumer confidence data out of the US. China's data is incredibly poor. And what's worrying for the global markets is the People's Bank of China would normally be easing by now. But if you're keeping up to date with what's going on in China, their debt levels are phenomenal. And actually, we've now reached the largest global debt in peacetime in history. And this is another, another issue. Now, I don't want to sort of put my bias onto, onto markets now because I'm very interested obviously in the momentum and the flow. And until we get this October meeting, I do think equities will find it hard to move lower. But it is a question of— look, yesterday just really sums it up how markets are trading. Positive news from China on the trade war possibility, uh, just deflating slightly as we lead up to this October meeting. Then as we get through the day, sideways activity, not great data coming out of the US, which really started to move equities lower. And then we get a further push lower in the evening as the Democrats come forward to try and propose an impeachment, um, on, on President Trump. Now this is nothing too shocking in a way. Certainly those of you who have been around a while, that word impeachment gets bashed about quite frequently. But it's Nancy DeLaio who's now come forward and is giving this a little bit of credibility. And it's a difficult game by the Democrats because I think finally they've now decided that although there's a potential for Donald Trump to use this impeachment in a way to try and galvanize support that he's being attacked by the media, okay, that he's being attacked by the elites, that's what he does very well. I think the Democrats believe that in this call with the Ukraine prime minister into the investigations of Joe Biden, there's gonna be enough juice in there that's gonna be hard for Donald Trump to get out of the predicament, and actually is gonna cause more damage than support to Donald Trump. So I think that's what the Democrats are hoping with this type of impeachment. But it's pretty worrying when you look at these debt levels, just to transition again, Here you've got obviously World War II causing a huge push higher in global debt levels, but then what we had after World War II of course was the global economic recovery, baby boomers, the investment in industry after World War II, huge US economic growth in the 1960s going through into the 1970s. Obviously late 1970s, um, global economy started to slow down somewhat. But global debt levels are at a really interesting level now. As long as there's not a problem, there's not a problem. And this is something to look at US equity markets at the moment. As long as everybody believes that— everybody believes that we'll keep on buying equities because monetary policy is ultra low, and in fact liquidity therefore is ultra high, and the demand for equities will remain strong, then everything will be fine. But I'm really interested in looking at are we, are we now poised for a decision to be made on global risk assets? How far are we before, even if there is a consolidatory tone in November between the US and China, actually the damage has been done? And the string of global data that we've had this week certainly looks like we could be at those interesting levels. So on those levels on the S&P, got a nice double bottom here going back to the beginning of September. 2958 providing support at the moment. The handle at 3000, I think, has been whipsawed enough now. Obviously it'll be a target if we get a recovery then for that medium-term high at 3026. Um, but where are we on the S&P? If you want to try and draw a trend line here, you'll be able to see there's quite an attractive break here. Let me just— it's always Dangerous trying to do, trying to do this live, as you know, CQG. I'm trying to catch those, trying to catch that. So that's one here where we found support, support, support, support. And you can see after we've broken through, it's definitely changed the trend to, to the downside. But just remember, you know, long-term view, if you think these US equity markets look toppy here, we're going back to July and August here. You know, in the short term, we are incredibly news-driven and we have these seesaw effects of risk-on, risk-off, risk-on, risk-off on a daily basis without a decision being made. I think as long as we can stay in this range in the S&P, you know, around from 2950— there, can you see the top from August there? As long as we can stay in this sort of sideways range here, then really there's, there's going to be no sharp moves to the downside, um, unless the global data or geopolitical news can, can drive us through that. So it's interesting looking at global debt levels, certainly, uh, looking at yesterday's consumer confidence, looking at the IFO. It does feel to me like the momentum is beginning to, to change. Don't get me wrong though, I know we've been here before, and that sort of whipsaw or rotation that I've been talking about between risk assets and safe haven assets, also clearly shown here in gold. If you go to, uh, let's go out a bit here on a daily chart on, on gold. I'm just going to remove the pivot points. You can see really over the last couple of months, look, we had risk-off as we go through the 1st of August into September with gold moving towards $1,567. Throughout late August, then into September, we've got risk-on back again and gold moving below that $1,500 handle. Now sentiment shifting once further to back to, to risk-off. And we have these seesaw effects on a wider term. You know, this has been going on. This has been going on on a bigger picture for quite some time. If you go back to 2016, you might remember at the start of 2016, We had— do you remember that was when markets really sold off after 2015 when the Fed hiked interest rates for the first time in the interest rate hiking cycle? Oil was trading down at $25 and markets started to slow. We had risk-off and gold was supported throughout 2016. Then central banks eased further, turns the taps back on. We then had risk-off as global markets recovered. We then had the Trump Trump bump end of 2016, forcing equity markets higher. 2017 sliding sideways until the 20— start of 2018 when we had a sharp rally in US equities. Again, this was the Trump pump, more on the fiscal, bringing back fiscal spending and bringing back those tax, uh, dollars being stored abroad. So we had risk on, gold moved lower. We've then moved back on to risk off And you can see these— we have these waves, we're going through these waves at the moment on the longer-term pattern as the market tries to make up its mind. I would argue, in my view, we are starting to see more of a trend in risk-off at the moment. We're just still getting these shorter-term waves, of course, as the market's trying to make up its mind. Um, but really, for me, I'm interested in a decision being made. This decision looks like It's trying to be made certainly in safe haven assets. The decision has not been made yet on where we're going in the equity markets. It's gonna be hard for that decision to be made until Trump and Xi Jinping meet in October. But it's interesting to try and discuss and think about as the data continues to get worse, is there a point past no return that actually even if there is a conciliatory tone between Trump and Xi Jinping, October. Actually, the damage has been done to global markets as a result of these trade conflicts, tariffs, and negotiations. Yeah, just one other thing going back to the UK. Obviously, you probably saw Donald Trump and Boris Johnson on the same pedestal yesterday. It's quite interesting. Every time I see— I don't know if I'm wrong here, but every time I see Boris Johnson in Donald Trump's company, have you noticed how awkward he looks and uncomfortable he looks? And I don't know, I'm a big, uh, big fan of looking at, uh, body behavior, and I'm a big fan of looking at what's trying— what's really going on in how somebody feels. And I don't know, Boris Johnson, who can sometimes, you know, he's got his boyish charm, he comes across in his kind jokey way. But when he's around Donald Trump, I feel like his, um, natural spark dissipates. I just don't know what is going on there. Um, just to finish on Trump then, on this talk on impeachment, um, this is all about the Ukraine, uh, discussion to try and get Ukraine to investigate into Joe Biden as we lead up to the presidential presidential election. Of course, I remember Clinton being very strongly under investigation for impeachment. It just, it just means more uncertainty over the political situation in the United States. The Democratic majority in the House opens the door for an attempt to remove Mr. Trump from office. Isn't it quite interesting where it's almost at the same time we might have a vote of no confidence in Boris Johnson and moves for impeachment against Donald Trump. Make of that what you will about what that says about Anglo-Saxon politics at the moment. Okay, so listen, looking towards the data ahead, what have we got? What do you need to look out for? I think it's going to be incredibly news-driven, especially from the UK government, especially from any stories about impeachment coming out of the US. So, you know, the, the biggest opportunities at the moment are going to be for those traders that are agile and well prepared. So as you know, you need to set your technical levels and your strategies looking at your different asset classes now, thinking if this then that. Looking at the Bund, for example, we've got the Bund pushing higher towards the overnight highs. We have such an important level here at 1.75 in the Bund. So 1,75 in the Bund, you know, you could say if we breaching 1,75, what have we got after that? We've really got the spike that we hit on September 12th of 1,7561. So this is, you know, again talking about those waves of risk-on and risk-off going through the end of August. We had risk-on, so safe haven assets moving lower. We're now pushing higher in the Bund again. and if you're trading European equities, for example, just keep an eye on what's going on here, and you might use that as a leading indicator in order to try and look for a break lower in the DAX, for example. What's going on in the DAX now? Obviously we're moving in the opposite fashion to Bunds, as you would expect. Let me just remove some of the studies here. Anthony Cheung is gonna not be happy that I'm taking away all of his Technical indicators. There we go. And move to continuation settings. Okay, yeah, so the DAX here, we're approaching this double bottom again over the summer in June and July. This is gonna— on a daily chart, like, that's 1, 2, this is gonna be 3 pretty solid days, and we're trading on the lows of as I speak right now. Below this level, of course, you've got the handle at 1200. I feel like we've been oscillating around 1200 for years now, um, in the DAX. But this is where it's going to be interesting this morning, certainly from Europe. And on the pound, of course, we're just approaching S1 now. We've got the low of the week coming in at 1.2450. So keep your eyes on the news flow, uh, please. On the data front On plan data, uh, not really anything of any note this morning. We've got an auction coming out of Germany for Bunds, that's 10-year government debt, uh, later this morning. So we've got current time 8:35, so in, in just over 2 hours. Um, this afternoon, mortgage applications out of the US. Um, we've got Chicago Fed President Evans speaks. That's going to be quite interesting bearing in mind that the US data yesterday. We've then got FOMC Brainard speaking, and then we've got FOMC George. So we've got quite a few speakers coming from the central bank, um, in the United States. So that's going to be definitely worthwhile watching in the US after we've had this weaker data? Are they able to give more clarity on the expectations of future interest rate cuts? And then obviously, being Wednesday, 3:30, we've got the oil data. Just to have a quick look at oil and see where we have moved, uh, look, here you've got the push on the, um, attacks on the Saudi oil facilities. We're right now about— we're back in the gap now here. No, there's, there's quite a large gap fill here in oil. So technically, I'd, uh, you know, just, just keep an eye out on that, at least to 56 to handle. Let me put some pivot levels on today and we'll have, have a closer look at where the opportunity could be. But we've really retraced that whole move from the attack on Saudi facilities. Yeah, as you can see there, here's the gap, nice clear gap. We've got the next sort of target, I would say, as the high on the 12th, 56.26. Now we've broken that low, then you've got 55.61 to look out for, and then S2 just under that. So actually S1 in the middle there. So definitely looking bearish on the oil front. Speaking of bearish, the pound's continued to move lower, so I'm going to leave you guys to crack on with the day's activity. Obviously, any questions, I look forward to taking them in the room. Um, it's going to be a news-driven day, so please stay fully alert and poised for further market activity. Okay guys, that's it from me. Have a good day.