DJIA Sees Its Biggest Gain Since 1933

Okay, very good morning guys. It is Wednesday the 25th of March. Hope you're doing well. I'm just going to have a look at this to start with. This is a heat map of the S&P 500. So rather than always be here every morning telling you about the doom and gloom, I thought I'd bring you a bit of green and a bit of positivity on this Wednesday morning. So as you can see here, quite a spectacular move really yesterday. And as we'll look in the Dow, uh, in, you know, we're talking about nearly a 100-year biggest move that we've seen in that stock index. So yesterday, obviously, Apple, you know, gains of 10%. And I was looking at some of the energy majors— Chevron's shares were up 23%, Microsoft nearly 10%. So yeah, quite incredible moves. And when we look over at the the likes of the Dow. The Dow actually gained from a points perspective yet over 2,100 points, and that would have been a gain in excess of 11%, uh, the biggest since 1933. And as you can see here, this, this axis on the bottom going all the way back to that, that data point of when we're, I guess, the, the depths of the, the Great Depression and the ensuing volatility that we saw there. And you can see despite the the 1987 kind of crash that we had on Black Monday, uh, exiting that out, you can see we're right on the extremities of the overall outlying areas of volatility that we've had most recently. As a statistic, the Dow has swung an average of 7% since the 12th of March. I mean, it's quite phenomenal, um, the, the level of volatility that we have had. But overall, I would say what has been quite apparent over the last day or two is the violent nature of the blips and the swings. Sure, there was a little pop when the Fed made that new kind of policy announcement 2 days ago, but otherwise I think from comparative to the, say, 2 weeks ago, a week and a half ago, when it was really flying around, I think things have calmed slightly. So perhaps this combination then of what central banks have done and this kind of whatever-it-takes coordination with the governments paying some dividend, you could say. But certainly that was the key story underlying— we'll talk about that more— the US fiscal package that's said to be over the line now. And that's going to be key as well because it's a, it's a real, uh, quite unprecedented, unprecedented in terms of the size of the deal. And this is one of the things I was looking at. Um, this was, you know, if you want to take a look at this, this is just a statistics pulled from whenever the Dow has gained more than 10%, what happens next? You know, this is a common question that, you know, if you're looking at the stats in history, it's quite interesting to look back at, you know, the other times we've had these types of moves. I mean, obviously 2008, as much as it was sizable moves to the downside, there were days when there was big snapbacks higher, and there was two of those occasions in October of 2008. Otherwise, most of these are based in the 1930s, and obviously just following the, the crash that we had in '87, there was a day bouncing back plus 10%. But you can see here the average returns one month later after a kind of a 10% plus move in the Dow typically is around a 3% loss over 3 months, 4.5% over 6 months, 7.87%. It's not until 2 years later we're actually higher. So obviously when you look at these types of things, I mean, for me I mean, this guy is great, Ryan Dietrich. I think he works for LPL Financial in America. If I did reshare or retweet this that he posted last night, so if you just go on my Twitter account, you'll be able to find it. Just search for my name. But here you've got to put this type of thing into context, obviously what the market was like, the market dynamics, the kind of underlying structure of the market, the context of the monetary policy in play at that point, the valuation in terms of the overall stock market as a whole. There's a lot of considerations here, so I don't blindly think, well, look, I'm bearish because the stats tell me that the market generally goes down in the period thereafter. And you can't be that simplistic, but it certainly helps, I think, add a bit of a layer of context just generally to your overall broader kind of thinking. You know, why has the market rallied like it has? Well, this is the big one, of course, that people are looking at. This is the Trump administration. They've struck a deal with the Senate Democrats and Republicans on a historical package. We're talking, you know, more than $2 trillion in size. So this is one of those things where I think Sam did a great, uh, it's called a montage video tweet about Trump, and it only goes back about 4 or 5 weeks. And it was Trump saying this virus is nothing, it's fake news, and then he kind of ramps it up and he's gradually gone to where he is at the moment. And, you know, one of the things here is this idea that they start with a kind of relative small package. It then went up to $1.2 trillion. You remember when I was doing the briefing, I think it was only Friday, and now we're talking in excess of $2 trillion. And this is one of the things that we've been pointing out here at Amplify, is this idea that, you know, these governments will continue to add to this number. And it's not, it's not, I don't think, going to be that unusual. But certainly the market's seeing you could argue a bit of a meaningful response down the fact this is gonna go through, it's looking most likely. I've got some details here just to break it down an additional level so you know what you're dealing with. The plan includes $500 billion chunk that could be used to back loans and other aid to businesses, checks of $1,200 to most Americans, most Americans, more than $350 billion for small businesses to maintain their payrolls, more expansive unemployment insurance, deferrals of taxes, and numerous other provisions according to those familiar with the details. So if anything, it kind of mimics, it's very similar in a sense to what the UK were doing, and probably in a proportionate sense from a size perspective, the same kind of firepower is being unveiled at this point. And this is what's so key, this coordinated global effort. To give you again a bit of context, in the, I think it was 5 months after the financial crisis hit in 2008, President Barack Obama at the time did an $800 billion stimulus package. What Trump's talking about now is in excess of $2 trillion. So just to put that, um, again side by side, the Trump package is, you know, huge in that sense. One thing that Trump has been saying is he's been talking about Trump starts national debate on when to reopen the economy. Now, the president faces pushback. He says he wants to have the US fully open for business by Easter. Now, Easter is the 12th of April, is that right? But it's not that far off. I mean, we're talking about 3 weeks, and I'm gonna say it now, I think there's absolutely no way the US will be fully opened by Easter. I feel pretty confident with making that statement. I was just having a look at the coronavirus kind of live tracker and specifically locking in on the US. So as you can see here, it really is picking up traction now in America, and particularly on the, the areas of which we know. It's kind of Washington State in the northwest, so Seattle and then state of Oregon, California and San Fran And then look at the East Coast and New York specifically. So I think there is no way, uh, he's going to be able to fully reopen America in April. I think he's probably off the mark from a time perspective, at least 3 months probably for full reopening like what we're seeing tentatively in Wuhan in Hubei province in China on the 8th of April. So for me, this, the lockdown measures, things like what we've seen in other more popular cities like in New York, uh, in LA, for example, and what we've seen now deployed in London, uh, and of course in mainland Europe, I think the only way for the US to go now is getting more onerous measures put into place, not the other way around. Um, and that, that's not going to be the short-term measure either, I don't think. Hence the reason why you're getting these monster kind of packages coming in on the spending side to support the economy, in addition to the Fed as well, as we saw, doing everything that they can possibly do. So I guess the big question then— well, before I get on to the charts and talk about the big question being where do stocks go next, you know, this was one of the other things. This is the FT's live tracker of the trajectory of the different rates of which deaths, tolls in certain cities are in regard to deaths doubling every day. Every 2 days, 3 days, every week. This is a graphic we've looked at before, but the one that's actually moved where the curve has gone that way, and the curve getting steeper generally is, is a negative, right? That means that the, the death rate is becoming accelerated. And what you can see here is New York. Now New York has gone from pretty much a kind of mid-level in terms of comparative to other areas to now one of the sharpest increases, almost deaths doubling every single day now. That in addition to Madrid having followed a similar path, but New York and Madrid could pass Lombardia as the worst affected sub-national regions now. And that was obviously that first initial breakout that we saw in mainland Europe where the Italian numbers, if you go back on here on the left-hand side, are still extraordinarily high. You know, some people look at the demographics of Italy generally quite an older population. They have, um, co-generational, uh, habitation, which is very different in terms of family units living together, you know, older grandmas living with young children and so on. And that of course increases the risk and further spreading. So Italy is a little unique in that sense, but you know, I think New York is quite a worrying one here. I mean, London still Numbers are increasing, but at a less rapid pace at this point. So the point being, I think Trump is doing what Trump does. He's kind of trying to spin positive lights on this. He's going to say that he brought Congress together for this, this package to bail out America. And as we're going to see at the moment, he's also trying to manage this ongoing tension with China as well, which is fairly precarious at this point in time. With that in mind, let's just quickly jump over to China. This was something in the FT this morning, and I'm not saying that this is moving markets, but it definitely helps to supplement this kind of global action that's taking place at the moment. This is China's central bank is considering deposit rate cut. Now what they're saying is reduction could come in the coming days according to those familiar with the matter in the FT. Lowering Lowering rates on 175 trillion yuan, that equates to around $25 trillion of household and corporate savings, would boost bank margins and free up capacity for lenders who are feeling the pressure generally from the, the rising of bad debt that they've been seeing, given the pressure that they've been under. So to put this in a bit of context, this is what the benchmark interest rate for saving deposits looks like at the bottom. And the old benchmark rate for loans is in the blue. But you can see the last time we saw real cutting action from the PBOC— so remember, when we've seen the Chinese central bank cut rates before, it's the reserve requirement ratio. So now we're talking more specifically about other measures, so the benchmark deposit rate, which would be slightly different. Now this is kind of their main core rates, if you like. And here, 2014, 2015, you'll remember This is when, you know, oil prices saw that quite catastrophic downward move. The whole global economy, we saw that was when one of the memorable moments when we were hitting limit down in US indices back in that period because of the fears of a Chinese hard landing. So that's when they took multiple steps to lower rates quite aggressively, and they haven't really done that at all since then. So if they do cut rates in the coming days, as is now broadly expected, it's going to be the first time that they've done that. Since 2015. So again, further measures that they're looking to deploy at this point. The other thing that they're saying here was talking about the White House's top trade advisor Navarro. He was talking and quoted in the press this morning, was said to be considering a 3-month deferral of tariff payments on imported goods to ease the pain of the economic shutdown caused by the pandemic. Now He has since come out and basically denied this, um, as what it's saying, he's denying it, these press reports. But more often than not, there's no smoke without fire, and probably this is up for discussion. Interestingly, in combination with this, Trump came out yesterday and he said he's no longer going to call it a Chinese virus. He's not been as forthcoming saying he was wrong. He was saying, well, that's what it is, it did come from there, but I'm not going to use that word anymore. And he was tweeting yesterday saying about how he supports American-born Chinese and so on. So he's definitely, you know, this is one of the things, it's kind of like the Easter promise that he makes. He says something and then he flips it. And, you know, the problem that you have is this kind of boy who cried wolf means that it's a twofold thing. One, a positive, he can change then and pivot his view and people can deal with that because it's quite normal. But the other thing is, is that if he keeps doing it again and again and again and again, when does it come to a point where people just don't believe what he's saying anymore? The problem you have, I guess, with the latter is he is delivering. The Fed have cut rates to zero, and the US Congress has now signed off on a north of $2 trillion package. Now again, I'm not here to sound like I'm some sort of Trump fanatic, but just thinking through the way that this evolving, I think it's one of those where he kind of muddles his way through but relatively unscathed in some senses. So yeah, I mean, that's, that's pretty much getting you up to date with the main headlines for today. One thing that you probably would have noticed earlier this morning is that the UK data— I've just got the calendar here— UK data has already come out. Now obviously Data normally comes out at 9:30. I've been on the phone and I've already called the guys at Newsquawk to ask them, the analyst desk, about what the deal is with this. They said that it is a permanent feature. I'm not sure of that myself, so I will need to qualify that statement. But UK data obviously is normally 9:30. I can understand logic probably if they did move it to 7 AM, just looking to avert probably any excessive market volatility, perhaps when everyone's in the marketplace dropping in earlier, pre, kind of generally around market open. Perhaps that's the strategy there. But here we had the inflation metrics coming out of the UK, and it came in at year-on-year 1.7%, in line. The month-on-month 0.4% above the expected 0.3%. The core reading on the CPI came in at 1.7% above the expected 0.15 and 0.6, but expected 0.4 on the month-on-month call. Again, these are February readings, so quite frankly, if you look at the sterling chart, it hasn't even blinked, and quite rightly so. This is backward-looking data, and I really don't think it carries any significance at all because also we know the stance of the Bank of England as well, and they're thinking very much so about the future. This is all backward-looking data. So that has come out early. Some of the other things they were talking about, the analysts, when I was saying this morning about why this might have come out early is ONS leak, and so they wanted to just get it out there before potentially then it does start to circulate. That has— I have seen that before over the years. If they're aware of this for whatever reason, they can just bring forward the actual release time. Another thing is that they've apparently just removed the lockup. Now, you probably would have read in the press there was a lot of issues about unauthorized accredited news agencies getting access to certain feeds at the central bank and so on. So perhaps they're going through a bit of a restructuring process, and might make sense because now Andrew Bailey's there, Carney has left, and maybe a review of these processes. But overall, I wouldn't read too much into it. Net-net, doesn't really matter, this data today, for any sterling strategies that you're thinking of. Here then, what else have we got? We've got the German IFO Business Climate. Obviously going to be quite interesting. We're looking for a meaningful shift to the downside, as you would expect, given that this is companies on the ground level in Germany, what they think about current and future expectations. They're going to have deteriorated quite substantially, as you would imagine. Yesterday we had the US manufacturing service numbers coming out for March, and they were— that they fell the most lowest on record. This is something being felt as well across the eurozone, of which we saw in those flash readings. And so if business sentiment is going to be depressed in, in Europe, or in Germany in this case, I don't think that's again too much of a surprise, uh, to be quite frank. Otherwise, we've got the oil inventories a bit later, they'll be coming out at 2:30. Remember, the UK clocks don't change till this afternoon. If you ever did want see what those API numbers were, I can just bring them up for you now just so we can see it together. ZeroHedge is actually the best place. ZeroHedge, if you're not familiar with the markets, is kind of a quite infamous blog site where it gets a lot of traffic day to day, especially from intraday traders. They tend to be a little bit sensationalist, but they do put out some, some decent stats and bank commentary and so on, which can be quite useful. So here's the numbers from last night. Just so I can share them with you. He had a crude drawdown of $1.25 million. Let's bring them up here. That was against expectations of $2.5 million. Cushing was a build of $1 million. Gasoline, a draw of $2.6 million, broadly in line. Still, it's a draw of $1.9 million, broadly in line. So let's have a look at the actual charts then and talk through a few things. For one, oil, um, here You can see it goes back to around when the data came out. No real way too much in the way of response, as you would expect. I mean, from the oil market, there's so much other things going on at the moment in regard to the ongoing price battle between Saudi and Russia, obviously the growth implications from the pandemic. I still feel, I still feel fairly bearish with crude, to be quite frank. I know we've had a a decent rally over the last 2 days or so, coming off around that lower bound test of close to $20 where we got to the— that point, uh, on the 18th. We kind of retested it right at the beginning of the week at the reopening of trade, but ever since then we've kind of managed to claw back some losses. But we've come up to this, this area now here of the high that we had yesterday. We've retested that in the Asia-Pacific session. It has held And I think that's a decent level of resistance to keep an eye on for today's session. You can see the R1 in the futures resides just above that point. So if anything, I'd still be looking to play that market back down today if I was having a kind of a directional bias. For the equity markets, I'm going to have a look at the S&P, and also, um, we'll have a look at the Dow and then, and the NASDAQ. Now the S&P here has seen a decent rise. This, this ellipse here, you can see with that big green candle, that was when the Fed conducted that surprise announcement on Monday at the beginning of the week. We then reversed that, but ever since that point came back to retest the overnight weekly low before then moving higher. We've kind of respected here this trend line on a couple of occasions, just being here and here for the, for the move higher. I was also looking at this trend line here, but it's already really gone through that this morning. See how it responds here as it's pulled off those initial highs. So you can see as we broke higher through that trend line, initial push up to yesterday's high point, and then we've had a bit of an about-turn here. A lot of people asking me about, you know, this whole dead cat bounce. It's come up quite, quite aggressively, decent move, particularly on a day like yesterday. And whenever you do get a 10-11% percent day. Generally speaking, it does make me feel like the market is fairly susceptible for a bit of a pullback, if I'm quite honest, because the nature of the— unless there's a new fundamental catalyst to just bump us up again, which there hasn't been because the news what we've been talking about is all things from yesterday that created that initial price movement— I do think perhaps a little bit of a pullback could be warranted at this point. Point. If we did get that, then perhaps if we come back down, there's a couple of different areas that I'd generally be looking at. But really, the, the lower bound level, I think, as a, as a target here— I just remove this— would be around here, really. So if we come back down, perhaps this level, that high that we had on Monday in the afternoon, you can see we respected it a couple times before 4. And if it comes in around the trend line on the timing, that could be somewhere to keep an eye on. So if I just put a rectangle kind of looking around this area, or if we push further down here to encapsulate that initial Fed spike high and the bounce off that trend line that we had in the overnight Asia-Pacific session. Just having a look elsewhere at some of the other stock indices. Let's get the— get the Dow into play. I think there's some key levels here as well. To keep an eye on. If you're looking, looking on a slightly longer time frame here on the 120 candlestick, so you can see a similar thing. It's had a bit of a breakout just a short while ago as we've got above the overnight high and yesterday's high. And so that pushed us up to the high that we had on the 17th. But again, it's kind of similar, got that 17th high and the R1 sat just above. And if we look at the NASDAQ hasn't yet really had a concrete break of that same kind of setup. Slightly different in a sense that it is holding for the moment, but given the fact now the S&P and the Dow have turned slightly, I expect that to hold for the moment. But certainly it's going to be more meaningful to watch when we get into the North American session in a few hours' time. Cable, just a quick look. We've been moving higher fairly aggressively ever since the Fed made that announcement. Obviously the dollar got hit on the back of the extraordinary lengths that the Fed are going to, to, to promote and support all levels of business really. And as we've gone higher, cable has been continuing to just claw back some of these levels of which have been in focus ever since since really the— just move this up— this tells the story of cable over the last 3, 4 years really, and this incorporating then the EU referendum level. And as we come back up, I mean, we're trading still about 170 pips away from it at the moment, but given the daily ranges that we trade at the moment, obviously the big upside resistance level will be the 120. That was the key level that really gave way about a week ago or so and led to this big run run down that we had, uh, quite quickly. Remember, it was the lowest we've traded since 1985 when we've got down to these lows, and that big day came, a multiple-point move. And so we're seeing just a bit of a bounce, and I'd say perhaps it can continue, but would be expecting whether today or in the coming days this week for the market to find some resistance up and around that level. All right, um, that is it for the time being. Couple of final points. If you are watching this and you've got this far in the briefing, then obviously please do follow us on YouTube. Just hit the subscribe button, click the notification bell to get the alerts for every day when we go and we deliver these, these broadcasts. And then do check out the website AmplifyTrading.com if you're interested in finding out more about what we do, whether on the trading arm or if you're a student and you're looking for further, further kind of training to develop your, your prospects for your career. All right, that's it guys. Have a good day and I'll see you tomorrow.