Global Stocks Wobble as Trade Talks Falter

Hi guys, Thursday the 9th of May, just gone 7:45 here in London. I think I'm going to have to start by saying congratulations to Tottenham Hotspur in, well, I can only describe it as unbelievable. The last 2 days of football, and they're showing exactly the same fighting spirit Theresa May is doing in not wanting to leave Europe. I'm just beyond jealous, to be honest, and not looking forward to when head of trading Piers Curran gets into the office, although he did promise last night that we're all off to Madrid for the final, so hopefully, hopefully he sticks to that. Um, just having a look at the, the chart, uh, before we have a look over yesterday in the headlines. Worth keeping an eye for those that are interested on the, on the DAX at the moment. You can see here just testing its, well, its lower level of the day. A bit of support found around here from, from yesterday as well. But the sentiment, you know, from walking into the office and having a little read around of, uh, the headlines, stocks do feel a bit negative in terms of their sentiment from overnight. So just keeping an eye on this potential trend line. We had a bit of support just a couple of moments ago, and you can see that's still held, holding for now. But if that was to go, especially, uh, the way the markets have been acting lately, you could get a further follow-through. And in turn, you can see the S&P not so respected on this trend line, uh, on the breakthrough It did hold, however, and they're near those lows. That low from— what day is it, Thursday? Tuesday— holding very well for stocks. And we'll have a look over at charts later on, but you can just see again how important that whole technical point is, uh, going back to the 21st of March. That's still holding firm. So keeping an eye on the DAX to see how that reacts around, uh, this, this low, uh, if that was to, to really get a breakthrough. And of course, with the volume picking up on that open around 8 AM. So in 12 minutes' time, you might start to get a follow-through elsewhere as well. Quick, uh, overview of yesterday. To be honest, from market opportunity-wise, there wasn't a lot going on. I would say the, the pound— we'll, we'll come on to in a moment— there was a couple of negative headlines, but Theresa May came out fighting again, and it didn't do too much other than that first initial sort of push lower. Then you can see it range for the the remainder of the session. Uh, the euro, couple of half-decent opportunities from shorting up at the, the high of the day just before that R1, but again, very small range, not offering too much there. We had the, the DOE yesterday afternoon, 3:30, usual slot, and that came in in a surprise draw. Remember, the build on, on Tuesday was the surprise. You had the reverse of that, a drawdown of nearly 4 million, and we did push higher, but again, small range for, for oil there, only a dollar and— well, not even a dollar and a half bottom to top. Quite interesting to keep an eye on this correlation with, with oil. And I tweeted yesterday, but you know, it's not a surprise to anyone to, to be aware of the correlation between oil and, uh, and U.S. equity markets. You can see here, this is the S&P, uh, and oil. So oil being the blue and the yellow candles, the S&P being your normal green and red, both peaking same sort of time, 2nd of October or just before the— for the S&P, um, as well on that sort of double top that it made. Boxing Day being that low. Now you could argue that oil was just giving the wink not too long ago on the 23rd of April that we were starting to, to drift lower. And in turn, the S&P has started to follow through as well. And you can see just that tightness of correlation. While it maybe broke down at, well, a touch in that the S&P pushed on a lot further and quicker than, than oil did, you can still see just the direction of oil through that for both of those. So keeping an eye on that. It might be that, you know, if you are looking for a buy the dip opportunity in equities you might want to see oil really find support and push higher. And you can use that as a, as a place where if you were to look at oil— if I just bring up a chart— it might be, you know, just looking at the back end of the week, where does oil finish? Can we get, say, back above $63? You can see we found really strong resistance there on the 6th, and the low of the 1st, and was also a really key level back on the 2nd. If we were to push back above that on Friday and close that might be an opportunity to identify an area in the S&P to, to get in, uh, as well. Uh, that correlation, obviously one to really keep an eye on. Uh, really good. Obviously you can see this, how good that is for the S&P. But I mean, one here, um, I think someone must have put this on the, the charts yesterday, uh, after I had a look as well and changed it to the Dow Jones. And you can see just how close that is. I mean, that is It's incredible, you know, makes it look like it is actually— is exactly the same chart, both peaking, uh, and, and bottoming out the same day. And also with those highs as well, but a lot closer, you know, followed there. Usually the, the S&P is going to be the one due to the energy sector that's going to move the most, but you can see Dow Jones there following it very, very closely. One to keep an eye on. Other than that, yesterday with, with those DOEs that we talked about, not not too much happening. Stocks were, were mixed overall. We had some positive headlines, some negative headlines. You had an, uh, an algo move off a sarcastic tweet only to snap back. But other than that, relatively quiet. I suppose the biggest sort of mover of the day would have been gold, which did push higher in the, the morning only to, to come back down. And this is a really key level here in, well, It's a lot messier here. Let me just clear this up for, for gold. And the reason, uh, why we had such a decent push lower from that level, well, you can see just the importance of this all year going back to early January. We then broke through— well, broke and closed through on the 16th of April. The couple of times we've come back to this level has offered a really, really strong opportunity to have got short. Now we've also had this double bottom, so into this interesting range now for gold. And like I said, we'll come on to these charts in a bit more intraday focus at the back end of the briefing, uh, but you can just see the importance of this level. Now, if you are interested in getting long, break of this trend line and $1,290. Or if you want that, that short, you know, this is also the 50% Fibonacci level from last year's low. If I just put that on, and also the current low, the double bottom from here, but also the high back in 7th of December. So really key level and decision time for gold. But yep, yesterday that would have been a good opportunity to have got short around that area as it came back down to test this trend line, which has been drawn on and holding again today. Speaking of trend lines, just at the corner of my eye, just starting to, to see the S&P push lower towards its low of the day. And you've got to imagine that in turn the DAX is just starting to, to pick up a touch. And you can see, yeah, still on its low. So one to keep an eye on, especially if we're now just 6 minutes away from the open and the volume will start to increase as well. Headline-wise, if we have a quick look over, and it's again a case of nothing really new to report more just reiterating the general sentiment of the markets that stocks are just a bit edgy over the trade talks, what's going on there, and are they gonna— are the US gonna impose these new tariffs on Friday from 10% to 25%? That's gonna be the main focus for the next couple of days. I reiterate what Anthony said yesterday, that, you know, it's probably just a case of this is going to get sorted. Um, understandably there's a bit of a pause, and I'm surprised it's taken him this long to, to go all gung-ho. And he's got a lot of room to work with, with the equity market, which we know he cares about so much from, uh, a sort of presidential running point of view. And he's just seen the impact that, uh, the negative headlines can do, but he's also seen how positive they are when they come in. And even yesterday when you had talks that it's all going to get sorted from, from Trump, you know, despite, you know, China not playing fair, the stock markets, especially in the US, jumped higher. So they're still gonna be moving off these headlines, but it might just be that we've got to— gonna come lower for the next couple of days. And I do feel today you know, give or take, if there was no new headlines, would be a day where we'd see markets come under pressure. Quite a good article I saw here from the BBC. I'll post this in the, in the chat room now for everyone to sort of have a look over, just to bring us up to date with, uh, the, the trade war, uh, or trade talks I should say, uh, in, in, in charts here. So you can see Now, just the trade deficit over time, how that has grown so far. And of course, you know, going into one of the, the points Trump made, uh, yesterday was his reasoning for perhaps why, why China are playing a bit hardball here is that they want to potentially, uh, go into negotiations with, uh, Joe Biden or another weak, uh, Democratic, uh, nominee. You know, his words, not mine. So yeah, especially going into the election, he'll want to— well, next year of course, but into the run-in, he'll want to get this sorted. And I think any hardball from the China— from China or the US is going to be short-lived, and there will be some good opportunities to get back into these equity markets again. You can see here the— just a list of what the tariffs have been imposed of, and this point here about the you know, vowed to slap 25% on, you know, another 325 billion of Chinese goods. So that's expected to be on Friday because the talks are going slowly. So any talk of that, is that going to happen, is that not going to happen, is, is something to, to keep an ear to the ground on. The new products that could be affected, you can see telecommunications would be the, the most hit there, and computer circuit boards higher up there. As well. So good, good little, uh, graphic to keep an eye on, especially if you're, you know, interested in, in, uh, trading, you know, specific stocks as well. Uh, how has the, the trade war hit the markets? Well, we know as we look at the S&P every single day, but Asian stocks, which are, uh, in oversold, uh, territory at the moment, a couple of them you can see just having a look here at the, uh, the free markets. The Dow Jones, which is pretty much Well, it's only a few percent above where the trade war started at the beginning of 2018. The Hang Seng, despite a decent recovery at the beginning of this year, along with the Shanghai Composite as well, is now just starting to tick lower as these, these talks seem to loom and not progress as both parties may want as well. Recently we've had trade talks between Europe and the US, and the US and Japan, which all things considered went relatively well. Um, but you have had the downgrade for, for growth, I think the second one or the third one in, in, in 6 months, not long ago. And you'll start to get these kind of headlines again running through: stock markets down, um, China's yuan tumbles lowest since January, trade war fear. And I think you've got to roll with that for the next couple of days, that the markets will just you know, have a bit of a pause. And there is still, you know, areas of interest below where we could find support. But next couple of days, I think we will drift lower. And looking at the charts once again on the S&P, as this is the chart I have open, an area I would like the look of if we can get down there. I know we've, we've run through this before, but just for, you know, the purpose of going through it again, you know, can we I mean, if we were to get back to sort of— and this is the, the futures here— around 29.30, uh, 29— 28.30, I should say, 28.10. I would really like this level as a, as an area to get in, you know, should we find support for that push higher around with a 2800 handle. I think the risk reward would make, you know, quite nice sense back up towards those highs, which, you know, I think we will see again albeit, uh, this market just coming under a bit of pressure. Well, from that intraday point of view, keep an eye on this current low from the week, but also because it— that the higher that 21st of March, as mentioned as well. Going back to, uh, well, the, the headlines, but overnight we had some, some Chinese data which was mixed overall, to be honest. The, the CPI inline, uh, the PPI a beat, but the new loans were down. And we've also got later on this afternoon, we've got the, uh, the trade, uh, the US trade numbers, uh, out in the afternoon. Uh, just confirm that time. Uh, trade balance, yeah, 1:30, which would be worth keeping an eye on, especially as we come into the back end of the week. And these numbers, you know, are they better or worse for the US economy as a whole? You know, Trump has been tweeting plenty about how, you know, despite the trade talks, you know, they're— how they're not at their final destination, and that is coming along, that the US is obviously doing a lot better than China is. And that's proven perhaps by the, the stock markets in the US outperforming quite quite considerably. Um, just to bring into the picture again that DAX, because I know, uh, the time of 8 o'clock is just ticked and we have got a break now of that trend line. So worth keeping an eye on this, uh, how we can sort of close the next 5 minutes below that as well, and, and the, the follow-through that it's going to have for other stock markets with the S&P now pushing to its low of the day as well. So potentially things starting to get slightly interesting after a pretty slow day, to be honest, yesterday. Just to go over some more of those, those headlines again. Trump says China broke the deal in trade talks. So we saw him tweeting about this, and they broke the deal, Trump said at a campaign rally Wednesday in Florida, which is leading him to raise tariffs. The president noted that top Chinese negotiator He was traveling to Washington for further talks. Good man, Trump said, but they broke the deal. So he's playing, you know, this, this hard man. It's coming— it's classic Trump, isn't it? I think the only surprise is that it's this year, 2019, that it's taken him until the 9th of May to really get stuck in and, and go from it here. I saw a couple of interesting tweets not long ago suggesting that the deal has been on the table plenty of times, but he keeps coming back and trying to push for more. The tweet suggesting it was almost like a child. But, you know, I am of the belief that we will get a deal done. And when that comes through, I do think there's still a bit left in the stock market to push on. And, you know, on the flip side, the dovish Fed, you know, albeit their last central bank meeting, they were perhaps more hawkish than expected. They're not looking to raise rates soon, anytime soon. And I do think there's more, more reasons that these markets will eventually go higher than not. Just might be that with oil coming down and the, the negative headlines on trade, that be put on pause for, for a while. Just to reiterate that point, Trump said, or the US said, it would raise tariffs on $200 billion of Chinese goods to 25% from that 10% on Friday. Um, obviously the, the market move really started on Sunday, follow-through on Monday following the Trump tweets and wiping considerable amounts of dollar value off global equities. But yeah, it's— he's saying all this, but he's also mentioning whatever happens happens, don't worry about it, it will work out, it always does. And that's, you know, how I would really roll with it, albeit maybe the next couple of days will, will be more negative. But if you don't follow Donald Trump in this day and age and your intraday trading, it's a necessity. He moves markets whether you like it or not. And I know many people, you know, do sit on both ends of the, the spectrum there. Just having a look at the, uh, the calendar for the, the morning, uh, obviously with stocks just moving lower here that will be the focus. But other than that, it's going to be quiet on the, on the data front really until we get into the back end of the session. We have some US numbers out at 1:30 along with that trade balance, the PPI final demand. Into the latter part of the European session, you have some wholesale inventory and sales data out at 3 o'clock. We have a decent amount of speakers. You've got ECB's Lane, which should be on the wires any moment. We'll keep an eye out to see if they were to come out and say anything more hawkish in nature. Fed's Powell speaking— oh, Jerome Powell speaking at 1:30, and then a couple of speakers into the back end as well to, to keep an eye on. But not expecting too much in the way of, well, of these figures to really drive price. Yesterday, just to wrap up what happened, you did have the The Peston Tweet, who, I mean, he's been relatively quiet recently. I think that's been the case for Brexit talks. I mean, you'd be forgiven for thinking Theresa May and Jeremy Corbyn were still even in negotiations. It's gone that quiet. But he was tweeting, and this one here: Labour talks with government on a formal Brexit compromise are very close to being terminated. This was reported by the Squawk talk, and it was getting a bit of coverage on, on Twitter. And, and the pound yesterday, if I just bring in the, the charts here, it was pushing lower at the time. Whether you want to really put it down to that or not, I think is up for debate. Uh, we're, we're currently trading on what has been a very, very key level, uh, this year historically. Just looking at this on that longer term, whether we close above or below this whole area is key. Again, you can see good support around 130 on futures, 20, 40, just as a zone, massively important. Can we, you know, find support here and push higher? Then, you know, next thing you know, 132 starts to get talked again. But if we were to close below here, I think— and I saw people in the briefing yesterday on, on the, on the comments talking about 129 on the pound— and I think if we do close below that, we, we would get that relatively quickly as well. So big, big level for the pound to keep an eye on, but those comments from yesterday not helping the cause. However, Theresa May was, you know, fighting her battle yesterday, rejecting calls to resign. We also saw a couple of days ago a tweet doing the rumor mill that Theresa May was going to resign. I know I talked about it yesterday, and I don't think really people bought into it at all. But it was interesting to see, and I, I put the, the question, uh, to the chat room. We were talking about, uh, what the reaction would be, and there were some that saw it as a buying opportunity, some saw it as a selling opportunity. I think it would be, uh, initially the, uh, indecision that markets hate would see it come lower, but just who would replace her would, would lead to that opportunity where you might see stocks really push on. Uh, not stocks there, the pound push on from, from there, uh, as well. Um, here was the article, uh, I'll put this in the chat as well for those that haven't read it. Uh, it was more of an opinion piece than necessarily, um, you know, a definite headline, uh, as talks really have, you know, gone, gone silent for, for now. Just, uh, to wrap up on the chart, uh, on the, the calendar before having a look at the charts, you can see Um, again, just to reiterate, quiet morning, bit of data in the afternoon, but I wouldn't be getting, uh, too excited about any of these releases, uh, to be the main driver for, for the day. If we have a quick look over, uh, the, the charts now, and I think good place to start considering we've had that 5-minute close will be on the, the DAX. If we just bring this in, you can see it snap back. Let's put the pivots on and this trendline. We did get that break to the S1 level. Let's just have a look where this trendline comes in again as it's disappeared off my chart. So be keeping an eye on that previous low. They got quite a good push down there, uh, off that, and in turn that is obviously going to help US stocks push lower as well. If the, the DAX was to confirm a breakthrough here, I'd be keeping an eye on this low that we had from yesterday and then the key one from the beginning of the week. And I'd like— like I said, I think the sentiment today is going to be lower. If stocks push lower in the US, what levels to be aware of? Well, obviously the, uh, the low that we had of the week, but more importantly, can we get a close below there? It was the high of the 21st of March. The NASDAQ didn't quite make that level, uh, as we were— well, if I put this on the daily chart here, it didn't quite make that level at the beginning of the week for from the 21st, 22nd of March, but it's now not too far away as we're testing the low and actually had a little breakthrough there. So stock's starting to, to get a bit, bit interesting. Your safe havens, if we have a look at T-notes, has pushed higher slightly this morning. Gold almost flirting with safe haven territory again on, uh, on Monday and Tuesday, only to come back lower yesterday as the dollar perhaps strengthen a bit, but that is higher this morning as well. The yen, uh, after Golden Week where it probably was best to leave alone, you have seen in the last couple of days— and this is yen against the dollar rather than dollar-yen— you have seen it push higher. And again, it's on those, uh, current highs of, of the week. So clear risk-off, uh, in the market. Having a look at the currencies intraday, is there opportunity for euro? I'd say while it's in this range, the, uh, the higher area to look for— go to go for a short, I should say, is, is not a bad opportunity. As with the euro, if looking for that continuation lower, I'd probably always look to see can you get a decent trend line on and a break of that and close below to look to go short would be the, the favored opportunity there. Aussie dollar continuing, uh, its push lower since yesterday morning, and the, the negative trade talks will not help this and that low that we've got, you can see from the beginning of the 6th, so beginning of the week, that's just been tested again. Now I've just seen a tweet just to wrap things up. Ajax shares are down 21%, which is incredible. So yeah, what a way to finish the week would be for Arsenal and Chelsea to also get into their finals. I'm not going to hold my breath being an Arsenal fan, especially considering the recent bit of form. But it does seem that, you know, the stocks are red today, so hopefully London will be red again later on. Any questions, as usual, please do let me know. I'll be on there, be on the chat throughout the day. But I hope you all have a great trading day.