Can The S&P Move Back To All-Time Highs?

Okay, very good morning to you. First of all, if you're based in London, the rain, I'm happy to say, has arrived. So yeah, after what's been, I think, the highest consecutive string of kind of +35°C days since the 1950s, I think. The rain has arrived. So turning weather forecast, temperatures are going to go to about an average of 28 in London, drop to 24 for the next following 7 days. So yeah, otherwise, uh, yeah, check out the Amplified Trading website if you've never had a look before. If you're new to the channel, have a look what we do from our proprietary trading arm, our trader development programs, and also if you're a student, our summer internship program which is ongoing right now, but we have another intake happening at the end of the month. Um, definitely just check out Amplitrading.com. And also as well, don't forget to like and subscribe to the YouTube channel. Content coming every day of the week, in fact, from either myself or the rest of the team on various different subject matter, uh, other than just this morning briefing that I deliver on a daily basis. But let's just have a look at the charts, what is going on this morning. And relatively quiet, but what I feel is some quite interesting developments actually In the FX market, the dollar has continued its, its downward trend, and that has helped elevate both major currency pairs. So with that in mind, let's just have a quick look at the EUR/USD pair. You can see it's broken above what otherwise has been a fairly restrictive range over the last 3 trading sessions, just coming up to its R1, which would be up and around those kind of candlestick movement highs just before we saw the move lower back on the 7th. So this would have been, from recollection, this would have been the payroll move when we saw that momentary, uh, dollar strength on the back of the surprisingly strong payrolls. So we're right back up, we've eradicated that move now. And here on the upside then, just coming up to the respective R1 on the daily pivots for the euro. So EURUSD is up about 44 pips, DXY is down about a third at the moment. Cable consequently then, as part of the— or per course of the dollar weakness, cable's just moving a little higher as well this morning. And I was just kind of freshly marking up some technical levels here in cable, changing up the trend lines we were looking at a couple of days ago. Even though obviously 3 touches would constitute more of a solid trend line, I just kind of like that ellipse here on the upside if we continue to move higher as an area of potential resistance. Kind of 3 factors there. You've got the R2 on the daily pivots, you've got the psychological 131 handle, and you've got that trend line coming in back from last Thursday and the retest we had back on Tuesday of this week, all coalescing on really the same area. So if we continue to come up, remain bullish there, be interested to see how, how cable reacts at around those, those levels for sure. Otherwise, in the gold market, we've had a obviously a roller coaster of a couple of days, but if anything, I'd say a bit of a period of consolidation of sorts. Um, that being now we're kind of just leveling out at around 1943 as we are this morning. Um, some interesting comments, uh, yesterday I was seeing from a couple of banks. Um, obviously people still talking a lot about yield movement when it comes to anticipating movements in the gold market. And on that note, let me just switch over on my charts to this. This is looking at real risk. So obviously people talking about real yields— gold fell as real rates on longer-dated bonds started to rise. And it gives a bit of context, I guess, as to the reasoning and rationales we've discussed on prior occasions why we've had this kind of big pullback in in gold, but subsequently also does give us room to focus on then as a signal what is real yield movement in order to define whether or not we see a renewed push down in gold or a continued recovery or in fact a consolidation, as is what is kind of happening at the moment. Morgan Stanley analysts came out yesterday and they said they would take a real reversal in real US interest rates to bring an end to the strong market for gold. But if US real rates were to move back to zero, they said that would spark a sharp sell-off in gold. So at the moment, if we're looking at the rate on the US 10-year inflation-adjusted bonds, we're still a way off that at the moment. And one thing that you would say is that with the Federal Reserve yesterday, if you think about the commentary which we heard, we had Rosengren, Daly, and Kaplan all speak. Pretty much all three of them were saying the same thing, which is that the US economic recovery will be slow until the coronavirus is under control, and Americans will have to manage life with the virus for at least another 6 months. So all kind of fairly, just generally, I guess, realistic but somewhat pessimistic about this, the longevity, severity of COVID-19. And this is what kind of the thing that we were inferring yesterday with the idea that ultimately we don't really foresee this continuous comeback of real yields that saw this shakeout in gold, uh, 2 days ago because of the fact that the Fed are going to remain in this accommodative mode. One thing that probably makes a little bit more sense then— this is looking at 2, 5, 7, 10, 20, 30-year yields in America. And just to give you a bit of context then, over this kind of last 3-day period where gold has seen this volatile movement, and you can see here it was the, the 11th where really the market saw that big move and that pullback in gold, and that coinciding then with quite a steep elevation that we saw in yields at the time. Now, if you remember, as we were saying, there's been a couple of catalysts— perhaps the developments with positive movements in COVID cases in America, declines in hospitalizations, some positive US economic data has come out, amongst other things— and so yields have bumped up. So the overall argument here is that um, that yields do remain quite an important component to watch here as to ascertaining that type of price movement in the precious metal. And on that note, one chart I was looking at this morning that I thought was quite interesting from a technical perspective was, was T-notes. Because yesterday, of course, we had US inflation data, and US CPI did come out stronger than expected. And at the time of release, little natural bump that you would expect, yields get a little pop, T-notes come down. And actually the 10-year found support at a real key level that our guys were looking at yesterday. You've got the 100 DMA, 139, the handle, and also 13th of July low all at the same point. And the markets were a really nice response off that level. A lot of people at the time were asking me, you know, do we think that then given that CPI number we could see another move lower in gold? And I was kind of saying, well, Yes, if we break this key technical level in T-notes. But what I was saying, because there's a couple of guys who are in that T-note trade, I was saying, look, if, if gold doesn't want to go, and at the moment it's an isolated move and only really T-notes saw a meaningful reaction to the CPI data, equities really didn't. I'm talking in the immediate aftermath. The dollar really didn't either. So for me, without that multi-asset kind of confirmation, if you'd like, to increase and enhance that conviction. We were pretty sure that that level was going to hold, and it was a nice opportunity then for a couple of the guys to get in long, uh, just carrying that move back up, um, you know, you know, nice 8 ticks all the way up to what was that previous kind of double bottom in the short-term price activity of the 28th of July and 11th of August. Moving it back all the way up again to that, to that point. So yeah, yields, yields are important still. Keep an eye on that, those key levels there in the 10-year. As you can see, it has bounced and stabilized. And at the moment, looking elsewhere in the other asset classes, the S&P, people are talking about, you know, we've staged this big recovery now, we've eliminated the losses that were seen in the evening of when, when gold was kind of breaking down. We've come all the way back up, and if you look on the daily continuation, you know, that same chart we always refer to, you know, the kind of— the grind continues. And we're within— if we take yesterday's session high, we got within, what, 14 points or so of retesting back to all-time highs again. So whether this is it or not, whether or not we'll see a break of this It's hard, hard to say at this point. I mean, there's nothing really too new from an individual basis to— on a stock perspective, this is all just generally then just taking heed from a lot of those things we've been saying on the COVID side, on the Federal Reserve communication, forward guidance side of what they're kind of insinuating at the moment with policy, um, would be supportive that of equities remaining around these highs. So I actually think for the moment perhaps we get a bit of an area of consolidation. Uh, consolidation— I was being conservative— could be quite wide from around that 133.12 to the all-time high. Or even at this point in time, if we're looking a little bit more intraday, you've got the Asia-Pacific high. Just had a brief flirt with it here at the moment. The kind of way I'd look at this market on any type of pullback, if I just quickly remove my camera so you can just see. I've marked up here a couple of rectangles, and really just looking— I kind of view the S&P when it— when we start to move to all-time highs, I kind of think about it as in moving in this— let me just quickly transition— in this kind of stepstone kind of fashion. So it— now we're coming back up to these quite elevated levels. The market tends— we're on an upside directionally we're moving higher as a trend. And when we do, we kind of go in an episode of consolidation. We break higher and then we consolidate. We break higher and then we consolidate. And you can see that quite, quite clearly here from these rectangles if I just point them out. So looking here, here So at this point in time where we are at the moment, you've also got this Asia-Pacific high just here. Uh, there's kind of an interesting area of potentially some support that could be seen in around this 55.5 to 60 area. That would encapsulate those previous highs, uh, and some of the response the market's had on the lows. So if we did pull back, um, there are definitely much more stronger levels. When I say stronger levels, I would say Probably down— if I just move that, let me get rid of this— down to this area here is what I probably like most if I was looking at a— with much more higher conviction, still with the idea then that we remain of the view that equities will remain supported at these levels, all things remaining equal. If you're being a little bit more aggressive on the the intraday basis, then yeah, really it's more looking around this type of area. Perhaps if we get a pullback to, to look to play the market back up again. But as you can see, that level has much more meaningful response to it. And then kind of stepping down in line with those other areas of where the market's responded before would be all kind of areas of pickups that you might see the market respond to on any type of decline like what we had back on Tuesday of this week. Okay, NASDAQ-wise, might as well have a quick look. It's always a talking point, of course, uh, and I guess more appropriate on the daily is what we've been watching. And yeah, that, that rectangle we've been watching, um, it's been in play obviously all week, still is at the moment. We had that momentary dip below back on Tuesday, and you know, that 21 DMA has just been, uh a real great level of support. I mean, it has done really throughout this rebound we've had in the NASDAQ. A little bit more messy when we had those Spanish-led European COVID fears, but since that point in time, you know, it has reacted really nicely. And you can see the way that that projected 21 DMA is performing. It would line up very nicely with that trend channel, uh, the bottom side of that going back to the rally that's begun basically since April, and that also coinciding with that, uh, quite key level at 10,939, which would be those ellipses here from those previous highs that you can see that the market has responded to on a number of different occasions as well. So near-term support, you've got 11,058. Below there, any further move to the downside, 10,939 would be a real key area of support. So again, Room for pullback, sure, but room for a spectacular sell-off, I'd say less likely. People will come in and look to pick the market back up, all things remaining equal. Of course, if there was a new breaking fundamental negative development, then sure. The only kind of negative thing at the moment I'd say is happening— if I just quickly switch my camera back on— is really on, um, Capitol Hill. I mean, the latest on that side of things is that Trump has accused congressional Democrats on Wednesday of not wanting to negotiate over the US coronavirus aid package. They've basically been on a 5-day stalemate. I believe that Mnuchin made some comments last night. He was talking about he wanted to force new talks with McConnell and Pelosi, but basically the Democrats were saying, look, we're not moving off our $3.5 trillion stall. That is it unless you want to talk on those terms, then it's not worth even speaking. And so there's no— not worth even speaking then, as far as Mnuchin was concerned. So at the moment, the market seems willing to kind of look over this. How long that can last, I don't know. I still think that the market generally is kind of of the view like what I've been suggesting, which is that ultimately a deal or compromise of sorts will get done. I guess unless the market is falling and real jobs, tangible jobs are at risk, which perhaps are kind of slightly eliminated or eased on the back of the executive orders from Trump at the weekend, is there a lesser necessity to deliver in the near term? In that respect, you know, it's kind of like Rishi Sunak and delivering, delaying potentially the budget until kicking the can to March of next year. Given the fact that you've got things like Brexit and the end of the furlough scheme, both two massive events all coming at the same time in really October when they're going to look to get the deal done on Brexit and the end of furlough. And so, uh, you know, choices obviously for governments then is about— obviously it sharpens the mind to get some sort of deal done. Do they extend the stipulant stimulus and these sorts of things when there's real risk and political damage at risk. So yeah, that's the kind of only thing I'd say that's a little bit more negative. But, but interestingly, going back to this yield conversation, because a lot of people obviously asking me, you know, what do you think for gold right now? And I actually think, yeah, a period of, I guess, a little bit more relative calm, perhaps a bit of consolidation. The interesting thing yesterday afternoon was that, as you can see here from the yield movement, we held on to some of the upward movement we've had in yields of late. Treasury yields were up for the fourth straight day yesterday, up about 2-3 basis points across the curve. The 10-year yields, as I said, have moved closing above their 50- and 100-day moving average. The 10-day breakeven did spike a little bit on the back of the CPI figures, around the highest it's been since February. But since that point, we've, we've we've kind of stabilized. And as long as that stabilizes, I think as too will gold to a certain extent. And looking elsewhere, one thing I thought was quite interesting is that despite this kind of brief recovery we did have in the dollar at the time, which was coinciding with that yield movement higher— the dollar was appreciating at the same time 2 days ago when gold was falling— That's also dissipating. As I said, the Dixie is down about a third of 1% at the moment. It's coming close in the Dixie back to 93. Uh, the key area on the downside is not until we get really down to 92.5 or so, which is where we were back, um, what, about a week ago, and then also towards the end of July. And that was when that EUR/USD pair was knocking on that long-term resistance line going back to 2008, which it has held so far. But worth keeping an eye on actually now that the dollar's re-weakening on where those long-term levels reside in EURUSD and cable up and around that 132. Cable's quite far off. The euro is probably more the one on watch at this point in time. Um, a few other headlines to be aware of overnight. You've had, in terms of the overnight Asia-Pacific session, a little bit mixed across the region. Japan was up the most, most sharply Um, Hong Kong, South Korea, China, a little bit mixed. Hong Kong lower, South Korea, China higher. The Australian market actually underperformed, a couple of disappointing earnings there to be aware of. From Australian point of view, you have some jobs data overnight. I don't want to spook anyone because to be honest, this type of headline that you read, Australia unemployment ticks up in July, is totally misleading in my opinion. Because as a matter of fact, although technically they're right. The unemployment rate ticked up to a 22-year high of 7.5%. That was well short of analysts' expectations of 7.8%. So actually this is positive news, as negative and dowbeat as the headline would suggest, and hence the reason why the Aussie has kind of just clawed a little higher overnight. Um, but yeah, going back to the China story, quite interesting. Um, the PBOC initiated their kind of regular, I guess, monetary activities overnight, providing a substantial amount of liquidity, which is normally their way of supporting the market. However, this article was quite interesting on Bloomberg this morning, questioning whether or not actually the People's Bank of China have been doing some covert bond buying in a kind of similar-esque sense to what we see in the Western developed world. To give you an idea, as far as the PBOC are concerned, They've always said that they would not adopt that same kind of quantitative easing model, but they've always suggested a willingness to support the economy through fiscal policy. But obviously that would— the two kind of would help each other in a way. And the reason why this has been flagged by Bloomberg is because of this kind of chart where monthly net change in sovereign bonds held by other investors has seen a dramatic jump out of nowhere, basically. Prompting speculation the PBOC is buying government debt, which wouldn't be too surprising. And the lack of transparency, or let's say clarity, over the communication on this, I don't think that unsurprising as well. Whether or not this is happening, I guess the data underlines that it is, and it's just another form of China looking to restabilize their market, which would be taken from a risk medium-term perspective as a positive thing. I would say is how I would interpret that information. Um, elsewhere, uh, we've had a couple of earnings reports out of Germany this morning, so just quickly get— getting up to speed. Firstly, from German IFO, the institute that releases that data— not the data, but they've made some commentary overnight. They said that companies see businesses returning to normal in an average of 11 months. Um, so I always think it's quite nice to have a bit of context as to what then actual corporations on the ground are feeling to determine how confident they are and about the shape of the general recovery. So in Germany, we're looking on an average between the service and manufacturing sector around 11 months, to give you an idea. Obviously quite a bit slower than the just a couple of months, 3 to 4, that we've seen in the stock market to recover. Very substantially. From an earnings perspective, here are the tops and flops for the DAX ahead of the cash open shortly. Just running you through some of the headlines, you can see RWE, Deutsche Telekom, the only two companies in the green, called higher in pre-market activity. RWE is Germany's biggest electricity provider. On Thursday, it will reach— they said that they would reach the upper end of its 2020 outlook for both core and operating profit and what they said has been a fairly solid and strong start to the first half of the year. So hence the reason their shares are higher. Deutsche Telekom has seen a jump in their quarterly revenue and profit following their US unit T-Mobile's takeover of Sprint, while their underlying performance also exceeded market expectations. So they're also a touch higher. On the flip side, Wirecard, you can see, is down 5%. Um, yeah, big move, but their stock does see large fluctuation. Deutsche Börse, the German exchange, has come out and basically confirmed what we, we already were expecting. They're going to replace the payment company in the DAX benchmark ahead of the quarterly index review. So they're basically getting tossed out of the main benchmark index in Germany. So they're down about 5%. Looking at the calendar for today, it's pretty quiet in terms of UK and Europe, not a great deal going on and no notable speakers. So it is quite a US-centric day. On that front, initial jobless claims are coming out. And just referring back to this graphic, this really— looking here on the far right-hand side was when we had that surprisingly strong jobless claims from last week. And I think today could be quite interesting. The median expectation is for this to remain pretty much unaltered. I think it's 1.2 million, which would be pretty much an even bar, if you like, from where we were last week. A fraction higher. But I guess the way to interpret this is markets have been responding to jobless claims because they're week-to-week data points. It gives us an insight rather than something quite backward-looking like payrolls as to what is the current job situation or the health of, let's say, the employment situation. And remember, through May and June, this is when equity markets were staging this really strong recovery we then had a slight wobble generally, and that started to coincide— and this is when gold started to fire up a little bit as well— when in late July jobless claims started to pick up again. And obviously this was a reflection of some of the halting of the reopening of certain states, if anything the reversing, as like what we saw in California and Texas and Florida and so on. However, it was a big surprise last week because it was quite a dramatic fall. If you actually look at the decrease from 1.435 to 1.186 million, you know, that type of drop really hasn't been seen until we go all the way back to kind of late May into early June. So I guess the question mark here is, was this a one-off? Has it sprung back higher, or is it consistent? Or if anything, has it improved even further at this point? The way to interpret this data, I think, even if this number had dropped to say 1 million, which would be a positive surprise, I actually think that that's an equity positive. Uh, and the point of that being that from an equity perspective, the Fed are so far away from ever changing policy at this point. You know, they are in supreme accommodation mode at this point in time. So if you can get this kind of almost semi-Goldilocks scenario where there are improvements overall, um, albeit, you know, this is still a sizable number of people claiming benefits, But this should underpin then the fact that these things are positive. You know, you could read into the inflation metrics picking up— I don't want to read too much into one data set, but you know, these are more positive signs. And if COVID does decrease, as has shown some pattern of doing so in America this week, then the Fed aren't going to change. Well, that's going to be a positive narrative, I think, for equities. So yeah, be interested to see how this comes out. So that's really one of the main things I'm looking out for this afternoon. We've got import-export prices as well from the States, uh, and more Fed speak. Obviously you got the gist of what those guys were saying yesterday, which was kind of general realism to the economic situation and the implications of COVID which undoubtedly sit more on the cautious, dovish side. So whether or not Bostic and Brainard come out and say the same thing They'll be speaking at 4 and 8 PM respectively. And then we've got the, the kind of tail end of the more longer-dated issuance coming out of the US Treasury this evening at 6 PM. All right, that is it. Let me know if you have any questions, always happy to help of course. And don't forget to subscribe to the channel, more videos coming same time tomorrow. All right guys, have a good session ahead and I'll speak to you later on.