Global Equity Market Correction - What factors are helping drive this move to the downside?

Hi guys, good morning. 24th of October, 7 days to Halloween, and it's all getting spooky in the markets. If we have a look— well, we'll start by having a look at the, the charts from yesterday where we saw a decent recovery in US equities, uh, in the back end of the sort of European session into the close. We'll have a look how the sort of the day panned out, and we'll sort of go over what's potentially going to drive markets for the remainder of the day. We'll, uh, cut the, the briefing just before 9 o'clock. We'll make sure it is anyway, as we have some, some data out of, uh, of Europe. And if today is anything to go by so far, you would expect it to be a relatively weak reading. Just gonna transition the chart before having a look at the charts from yesterday. We just had the, the German manufacturing, competent services numbers out all missing expectations, um, along with, with France, the manufacturing having a miss there as well. So be interested to see what happens in, uh, in 20-odd minutes or so, just under 20 minutes. The reaction you can see in the euro here, uh, thousands of contracts going through, big pop through that low of the day. While we have, you know, if I put this on to a minute, you can see this, the extent of that move. While we've retraced over half of it already, you've got to imagine here now if it is a worse miss than sort of what the market might be expecting now. This could really sort of break lower, taking us back to, um, that trade opportunity I like the look of on euro if we were to sort of break through that, that trend. And, and I feel we could really go. So something to keep an eye on perhaps for the remainder of the morning. Going back to the charts from yesterday, no better place to start than the, the S&P, uh, or if we put it down on a 15-minute. I remember doing the briefing and, and saying how I felt like it could be a bit of an overreaction, and the market would be telling me that if we could perhaps break this trend line. And literally held on the trend line and that previous low and the S1 and continued to go lower and lower and lower till— until, I should say, we found really, really good support on what was the, the back end of June, the 28th of June, pretty much to the tick. And then that bounce you can see into the back end of the session was, was quite something. This morning we have started to drift down lower again, so similar type of price action to what we saw yesterday. But still some buyers in the market. Yes, there would have been a great place to have taken profit, but that reaction that we saw was, was pretty, pretty incredible. Having a look over now to the Dow, you can see similar push higher. And of course, similar price action this morning. And the NASDAQ, you can see, actually made a new high for the day following, uh, that pullback there. And the pivot for now is, is containing it. So we'll go over what potentially is pushing these markets lower, what at the same time, if this— these fears ease, could have that return higher, um, as well. Just having a quick look at gold, we mentioned that pushed higher, uh, following this, the sort of the Asian market sell-off, and we found quite good resistance there on levels not seen for quite some time, for going back to sort of the middle July, uh, that we had broken through. So really key level. I remember doing the briefing, uh, a few times back in sort of August and talking about the 1235 handle, handle if you like, as such a massive level. And that would have been the area where I was looking to buy if we had broken and closed above, it would have been around this sort of time where I was thinking that, and we never got there. Uh, well, we did, but it held as resistance once, twice, having broken through. So really key level to keep an eye on for gold. We get above that, and you can just see if I put this more longer term, just the importance of that area. Let me just screw it across. You can see it was also the lows from November, uh, last year. So massive level, 1235 on the futures in gold there. Held very well and was also a fib level going from the, the high that we had of this year, uh, the 38.2 Fibonacci level. So gold regaining some of its sort of safe haven status back, as we saw yesterday in the Asian session with the markets coming under all sorts of pressure. Um, but anyway, let's just sort of run through what potentially, um, what potentially could sort of continue this downtrend in in markets. You've got the— well, quite an interesting chart I'm going to sort of share is the FTSE All-World Index, which is down 7% this month. 3,211 companies have lost over 20% in dollar terms this year, um, 50% over 10%, and only 851 companies are actually positive. So having a look at this chart, I mean, this is just the last 3 days. You can see it's been on that downtrend. The week, again, even more so, really from the sort of middle of October, so 7 days ago, when we actually had that first part of the sell-off in US equities anyway. So you can see when that really started. So 7% down in the month. Yes, of course, if you put it on the, uh, your longer time frames, you can see where it's just a small blip, just like we saw, uh, at the beginning of the year, the sort of the year as well, in January, where my mouse is as well. But Yep, down now 1.66% on the year. So quite a lot of companies within, uh, sort of the world now in negative territory, bear market territory from their recent peaks. Global growth is obviously coming under quite a bit of pressure as well. Citi's Global Economic Surprise Index, an index that matches, uh, sort of beats and misses and expectations expectations of all the data that comes out has been negative since April, which is the longest sub-zero stretch in 4 years. So going back to 2014, the, uh, the sort of Economic Surprise Index is, you know, sub-zero, which, you know, suggests we're sort of slowing down in global growth. The earnings keep constantly missing expectations more than sort of bettering them, and you saw that again this morning. Yes, you did have the, uh, the Swedish, um, announcement rate decision. We've also got a rate decision later. We'll come on to sort of the global tightening as well, which is obviously having an impact. But the sort of weakness of the, of the data that has come out— you've had the IMF not too long ago lower, uh, sort of, uh, global growth by 0.2%. Usually not a massive move on markets, but You know, it does feel still like, uh, it is perhaps a bit more of a momentary blip lower. And when this happens, you get all the negative headlines, you get reasons for, for why we have come lower. But, you know, you saw yesterday real sort of buyers in the market still, um, and, you know, already now it's a little bit of a revamp back towards that pivot in, uh, in S&P anyway. On top of that, sit by the dip. And well, actually, I think quite a key point, guys, to, to make is that Anthony is now back in the office, which means the markets aren't going to move today. Um, whenever he has a day off, he's out of the office for work, that's when we get these big moves. So I would, you know, unfortunately we're not going to make massive lows today or massive highs, so be careful out there. Um, following on though, you've got obviously the China slowdown, which which is adding to that global growth situation. The slowest GDP figure since 2009, um, obviously still in the, your sort of 6%, which is fantastic, you know, all things considered, but was the slowest raise since 2009. The CSI 300 index, if we have a quick look over as well, you can see on the year is, is heavily down, down 21%. The Hang Seng down 15%. So all of this is obviously weighing on global equities. Trade tensions, obviously not helping either. You've got already $250 billion amount of tariffs on Chinese goods, and if there's no progress, that's rumored to go to another $200 billion, and then perhaps sanctioning all Chinese imports. So this would of course have a negative impact on Chinese equity markets. US equity markets and hence global equity markets would come down again. So that's something to sort of bear in mind there. Uh, US earnings, so we're going to have a quick look at actually the earnings for today. We'll go into the calendar later on. After the close, I think quite a key one to keep an eye on is Microsoft, and then tomorrow, uh, the Amazon after close as well. But yesterday we saw Caterpillar We saw, uh, 3M as well, which have sort of been, uh, bellwethers really for earnings season. And both of those came under pressure. 3M missed, Caterpillar actually beat expectations, but some negative comments drove their share price lower. And really from that you saw the Dow drop quite, uh, significantly off that before then making these lows, and the S&P and NASDAQ fell, uh, follow suit. Um, is this as good as it gets, Q2? I mean, that's actually what, you know, analysts were saying back then. They were saying Q3 isn't going to be as good. Absolutely, I think Microsoft and Amazon could help come to a bit of a recovery here, so that remains to be seen. But is this as good as it gets? Global growth slowing, earnings season now in full effect. Um, you know, for all these points, of course, if you see turnarounds, yeah, sure, we can, we can reverse quite nicely. Um, so yeah, China slowed down, US earnings, trade tensions, and of course you've got the, the raising of rates. The Fed expected— I mean, it was priced in, isn't it— for December to be the fourth hike this year. We had some more comments out of Donald Trump again, uh, last night, some quite funny ones. Uh, Trump says Fed Chair Powell almost looks like he's happy raising interest rates. You can just imagine him him saying that, uh, as well. And, uh, there's another one. Trump tells Wall Street Journal— sort of his go-to complaint, isn't it, the Wall Street Journal— the Fed is biggest risk to US economy. Uh, so yeah, going back to the sort of the point, you've got the Fed tightening, you've got obviously Bank of China— uh, Bank of Canada, sorry, 97% priced in for a hike today. You've got the ECB expected to, to end their bond buying program at the end of the year. And even got Japan talking about easing back on their sort of, you know, monetary policy situation as well. So global— and obviously Bank of England has raised rates this year. So yeah, the tightening of sort of global markets is adding to this. You know, I think you've got a bit of the political uncertainty in the mix as well. You've got the midterms coming up in the US with nothing really concrete Prediction-wise, I mean, I think the, the things that would move the market the most would be either a Democratic sweep or a Republican, you know, big win. We kick on the sort of the, the Democratic, uh, side of things, and then you just get more investigations and this new, uh, sort of middle, uh, sort of bracket tax cut that won't be able to get passed through. On the flip side, Republican winning, you could get that, and that could be the sort of the saving grace. And it's all these points could— I think if we do have some good earnings over the next couple of weeks, it could be a sort of speed bump in this down sort of move that we've had, and we can look to sort of recover a bit. If the China trade situation eases and these— this extra $200 billion doesn't get imposed, that's positive. The Brexit scenario, Italy, of course, all adding to this situation as well, which, you you know, perhaps, uh, any positive talk and we can start to see a bit of a reversal there. Let's go into the, the charts longer term. I've got the 250 and 100-day moving average here on the, on the S&P, and you can see currently all below. It's obviously quite, you know, a bearish signal there. And certainly where we close the week will be massively important, um, for not just the S&P but of course the Dow, which you can see is below, and the NASDAQ was the last one that was just holding on. And again, it's found a bit of support on that 200-day moving average. So maybe perhaps one to keep an eye on, although we are starting to get a bit choppy. And you know, that, that, uh, in terms of corrections, I think in the markets, yes, of course they're healthy, but I feel during the corrections, that's when your technicals just go out the window a bit. Um, so the 200-day moving average, perhaps just one to not pay too much attention to in the in the, the sort of shorter term. Last night as well, you had the, the API, uh, numbers. Let me just bring that up. We had quite a big, uh, build, uh, more than expected as well, point, uh, plus 9.88 million. Uh, last week we saw a drawdown, which was a bit of a surprise in the API. Um, although I, you know, the reaction— I, I read this, this morning, I was thinking Well, especially the way oil moves yesterday, probably wasn't much of a reaction anyway. But also we're coming into that sort of refinery maintenance season where builds are expected. So we have a look at the reaction here. You can see circled in, in the API release, not much, was it? And if anything, we've actually drifted higher. But yesterday in oil, another market that moved quite significantly when that level of support went from the 18th, 19th, 22nd. So Monday, quite a clear, clear break and actually some really good opportunities. I was over with the sort of the newer traders last, uh, last night and just the opportunity every time it broke, just coming back to, to retest those levels quite clearly. The S1s, S2s working very well and it continued lower and lower and lower. Whether we can get anywhere near a significant sort of move in oil, I'd be very surprised. I mean, from that low to high What's that, 60— let's say 65.74 is the, the low. I have to do some quick maths here. For nearly $4, pretty incredible move there for oil. Uh, calendar-wise, let's have a quick, uh, look at that. I mentioned I want to wrap up, uh, way before sort of 9 o'clock just so you guys can prepare for the, the numbers out of Europe. We've— and just to reiterate, let's just flick to the investing.com. You can see, just to, to show there again, the German numbers worse than expected for the composite manufacturing and services. So it would be interesting to see, going back to that calendar, will that apply for those numbers at 9:00. Usually it's quite a good sort of indicator that it's going to be worse. But for a further push down in euro, you would want to see a bit of more of a miss, as obviously the market starts to price in these numbers might be worse. Out of the eurozone. Going into the back end of the, the, the morning, I'll just be sort of aware for comments as it sort of dries up data-wise. But the afternoon looks to be pretty jam-packed. You've got some data at 1 o'clock of the US building permits, uh, permits, you know, not necessarily the, the most exciting release, uh, before we go into 2:45 manufacturing and market services data from October in the US. And then of course the big one for, for those, uh, CAD traders, the Bank of Canada rate decision expected for a 0.25 rate cut to take them to 1.75. That is 97% priced in. So obviously what a move that would be if they were not to do that. But of course the main part of the move, as they're expected to, would be more future projections, comments that come out. The press conference takes place UK time 4:15, so, uh, hour 15 after the release. And then, uh, half 3, you've got your usual slot of the DOE numbers. And of course, that is going to be the last 3:30 release for a couple, as the clocks do change here, uh, Sunday at 2 AM. So those, uh, times will vary slightly, which always makes it a bit tricky for, for newer traders. Um, but yeah, I mean, listen, have a quick look over there. The sort of the charts ahead of, of the data. Euro, which we talked about, quite a key push to the downside, has continued that now. So I'm just going to have a look at this sort of longer term chart, which I put in the strategy on the Monday. I feel this is a potential really good opportunity if we can really have a go at extending through, uh, these lows here. It's just testing that now. Maybe the data is going to be what sort of drives that down. So one to keep an eye on for for sure. The trend line that had broken in the, the pound a couple of days ago— I mean, look, if you were taking it on, on that daily chart, what a fantastic trade that would be. We talked about how that would be the sort of the opportunity on the test of resistance. However, it probably was a tricky one to take, and we had a comment out, uh, in sort of the early part of the, the afternoon which really pushed the price up, albeit, you know, nothing majorly new there. And we actually retraced that whole move, and a good opportunity on that retest of the pivot to the downside. The pound under pressure this morning early on as well. The dollar— oh, I haven't got the charts. Uh, here you go. Let's go, just go back to that euro looking on the longer time frame again. If we break through, uh, that trend line I was just mentioning I feel you could have a really good opportunity to, to get short to that low of the year. The, the pound, again, just to reiterate that trend line we were talking about, the break of that. You can see we had a retest. I mean, that's as perfect as it, as it's going to get. And that's your first target there, isn't it, on that low from the 1st of, 3rd of October, looking to come out there before fading down. So anyone that got in that, you know what a trade, uh, that would have been. Um, any questions, as usual, please do get them in the chat. You've got 10 minutes now until the, the Eurozone data. Um, and if the, the Citi Economic Global Economic Surprise Index is anything to go by, it's going to be a miss of expectations again. Um, but it remains— I think it will be quite an interesting day, definitely data-wise, and the way the markets are behaving, you know, there's some decent opportunities out there. But let the market come to you. Trade what you see, not what you think. Good luck for the day ahead, and any questions, obviously, please do let me know. Myself and Anthony and Saiful will be on the mic throughout the day.