LIVE Q&A: Ahead of the US Market Open

Okay, just testing out the mic. We are now live on YouTube, Sam and I.

Hello, good morning or good afternoon depending where you are.

So first off, before we get going, can I just get a sound check? Because this is live, so it's not pre-recorded or anything. So let me know whether or not you can see and hear everything okay. First, and then very much look forward to taking your questions. Obviously, there's been a hell of a lot going on, but before we get into that discussion, can I get a "why" in the chat if you can hear? So guys at home?

Michael, nice.

Okay, cool. So just while we're covering this, let me give it a bit of an introduction. Um, first of all, if you haven't joined our channel before, make sure you like and subscribe. I'll introduce quickly myself and my colleague here, Sam. So my name is Anthony Cheung, I'm the head of market analysis here at Amplify Trading. My job very much is a macro-oriented trading firm across different asset classes, this kind of bigger picture stuff where it's market volatility like what we've had with coronavirus, but with the trade war, with Iran at the beginning of the year, Brexit, and now this kind of plunge in oil prices is exactly what we would very much focus on looking for our trading opportunities. And then I'll let Sam introduce himself.

Yeah, so my role here at Amplify is to sort of risk manage and mentor the guys on our trading program. So it's certainly been a very interesting last few weeks, and today, what a day it could well be, and week ahead. So yeah, exciting times, and I look forward to any questions that you guys have on the charts, which we'll come on to shortly as well.

Yeah, and then in the chat room, you can see a very handsome man there, Piers Curran. You can see the little icon with his face. He's in the chat at the moment, so He's our head of trading, otherwise, as he always is, busy as ever. So, but he is more than happy as well to type in there if there's any specific questions you have from, from him. So hopefully we've got our bases covered. If you do watch our briefings in the morning, I'm kind of more fundamental macro, Sam's very much more technical in that sense on the, on the specific execution risk management side, and then obviously Piers can help on that side as well. So yeah, any questions please feel free to go ahead. Otherwise, Sam, why don't we just have a chat about what's been going on this morning? Because since we delivered the briefing, there's obviously been a little bit of movement, and particularly oil. We'll start there.

Yeah, I mean, an insane drop below, I think, 31% at its, uh, its most. You can see finishing near $42 on Friday on the futures, and then yeah, back down to those lows. That you can see here. I'm just going to bring in the weekly chart because we talked about this in the, in the briefing, and it's quite important just to note the difference between futures and spot price because the low that we had in very early trade on spot was, uh, also exactly the same level that we had back in 2016. But the futures, you can still see, has a bit of room to go, give or take a few cents, around $26, uh, but And we did, you can see here, recover once we hit around $27.36, and then we're up to towards where we've got a bit of a ceiling around $33.67. And also more of an intraday level I would have marked up around $31.50. You can see we found a bit of support around that point. I think if we get below $30 at any point today, I think the rest of the move lower would come pretty quickly. But yeah, insane, insane price action, um, certainly in the, the early hours. The, the move from $30 up towards, uh, $33 was, was pretty quick and very violent. Certainly I think going into the US cash open is going to be interesting, and I would say there's no harm in sort of waiting for that period. You can see The Dow Jones, the S&P, the NASDAQ all currently limit down, and how they open will be a good sort of guide for the rest of the day. You can see oil here just pushing up a bit, and you know, that's just even more reason to have $31.50 marked up in my opinion. So yeah, you know, can it— do you think it can go lower from here?

Yeah, we were, um, let me just transition. So we Sam and I were having a bit of a— well, we had a conversation last night, in fact, and we were talking about, you know, if we do gap down significantly, as we were kind of anticipating, well, where would be— we were talking more about the long at the low rather than trying to get short a gap-downed market already. But yeah, it's an interesting question because there's a lot of politics related to what's going on at the moment. In oil. That's always been the historical way of which that commodity has always operated, given the fact that obviously a lot of it in the past has come from the Middle East, of course. And interestingly, this gap down is the biggest gap down we've had since the initiation of the Iraq— what was that, that, uh, the Gulf War. So there are some stats I was covering in the briefing. Um, the different— the problem I have here, and I think from a fundamental point of view, you've got to think quite strategically about, from a, uh, the idea of, uh, gamesmanship, if you like, what are the agendas that the different parties or powers that be have. Now, we know that the biggest 3 oil-producing nations in the world are America, Russia, and Saudi Arabia. Now, what's happened, and we were talking earlier this morning about Russia not agreeing with Saudi Arabia and how we both felt that tactically that was probably a pretty strong move, but probably a good one from a Russia— Russian point of view, because Russia have a little bit more flexibility about where they need oil to trade at. Russia have not also just IPO'd the world's largest company by valuation, Saudi Aramco. Remember, Middle Eastern markets trade on a Sunday. Saudi Aramco is now trading below its IPO price, and it was down over 9% yesterday. So that's the worst possible result that you could want after that initial public offering. And then obviously Saudi want to diversify their economy. They need money at this point. So if you think about Russia, then why not just put a bit of pressure on while you can? The other side of this that I think is really interesting is how is Trump and the Americans going to respond? Because the thing I was talking about in the briefing, just in summary, was if oil trades down at 30, sub-30, this is hugely problematic from some— for some of those small, smaller oil firms in the States involved in highly leveraged debt in regards to trying to make as most as they can through this kind of evolution of shale and US North American production. But the problem they have, if their credit quality is already bad, can they cover their debts with their available free cash flow? And if they can't, bankruptcies ensue and unemployment. That's really bad for Trump. So Trump's got to make his mind up here. So yes, it's a difficult one to weigh up. My initial thought was, I think the market— if we go back to that chart, my initial behavioral interpretation was, as per what we've seen over the last 2 or 3 weeks, markets nearly always over-interpret the negative assumption. Like with the equity sell-offs, it's like we come down very quickly, we rise quite slowly, but we come down. It's always just the nature of how human rationale tends to operate in that uncertain, uncertain environment. However, um, yeah, whether or not— if Saudi follow through and start pumping 10, 11 million Russia don't move, the Americans are not going to move because it's too good for them in terms of pumping up at these record levels, and coronavirus is only going to further impede global economic growth. I mean, you said earlier, what can they do if they cut production now? I mean, you've got to start cutting. Yeah, I mean, there was 1.5 million which made the Russians unhappy, but you've got to think they've got to be doing even more than that. So I don't think it's just a matter of cutting oil supply. I think it's a combination of real big firepower on the fiscal side to try and offset then this inevitable quarantined areas in these other Western areas, and, and then supplementing that with central bank intervention, further rate cuts, more liquidity operations, more everything essentially. It's gone into that type of situation. And so Yeah, kind of a little bit like I feel about equities. It is probably going to get worse before it can get better, but it will get better.

I agree.

And so then it's about, do you trade now? It's highly volatile, quite difficult to get hold of. Or do you wait? Do you just be patient and then do you find some amazing opportunity?

Um, you know, it's discounted, right? Yeah, I think with these kind of moves, and in a way I'm just gonna bring in the pound, it's It's kind of similar to the 1.20 on the pound, you know, nothing wrong. You don't want to be early in these kind of trades because you can get those pops lower. And like with equities at the moment, we keep going lower with oil, we've gone lower. But better to be late than early because if you try to catch this early now and you're saying, well, you know what, oil discounted price, I'm gonna get in right at this moment, I would wait for a bit of confirmation, whether that be, you know, fundamentally or price giving away the signal to get in. I think there's absolutely going to be a lovely recovery to come at some point. Right now I think it's got to get worse. You know, the situation in America at the moment, we're just at levels— I know we're gonna probably see a decent push lower still to come today, but we're just where we were in August last year, which is a pretty insane thing to say. So there could, could well be some more to come, but at some point there's going to be a a great opportunity to get in back to those highs like we saw in 2018. Uh, if we just bring on, you know, this insane trend channel that we're in, you know, nothing wrong with sort of, you know, we're missing out that initial push. And you can see once we got back above there, we, you know, continue to push higher and higher. And, and, you know, look at the, the move that happens. So for this, I mean, I guess actually now it's worthwhile bringing in this trend line here back again just in case we do hit there. So I'd rather be late to the party to get long.

Just on that, on that chart there, on that timeframe, remember it was Citi and we had Deutsche, and everyone was looking at 2730, 27, yeah, right there. Yeah, so that's where a lot of the big banks were calling about a week ago, week and a half ago. I think Citi was the first one out, and that was when prices were above 3100. Yeah, and that was when we had that big dip and huge volatility last week, and then we've pulled back down lower. So absolutely, I think that's It's in sight now. Yeah, but that's a big level there.

Massive level, massive level. I think you're going to have people looking to take advantage of that. And you know, the, you know, what the Fed's gonna— are they gonna do anything today or talk it up? You know, that will be another point in case— I mean, how not long now till the next Fed meeting.

And well, don't, don't forget the Fed are in the blackout period, so they can't even I can't even say anything at this point. But just for any new traders though, what the Fed can do is they can pick up the phone, they can call their anonymous source at the Wall Street Journal or Bloomberg. So, so don't be of the mindset that just because they're in a blackout period that they can't still verbally try to intervene in this if there is a consistent volatile market. There are other avenues which are very much known in the marketplace that they use in order to convey that kind view. But Sam, quite a few questions about gold. Yeah, talk me through what you're thinking with that. And obviously gold has seen some massive price swings on Friday afternoons.

Yeah, last couple of Fridays been insane, which actually—

so, for those Fridays, timings-wise, that does bring about obviously a lot of— you often get this, this kind of idea about margin calls and and the— if equity positioning has been dented badly, then looking to come out with some of that positioning right at the end of the week in order to fulfill that requirement on the margin side, perhaps. But ultimately, I mean, the trend is still higher here, isn't it?

Yeah, yeah. I mean, we put it on the week, have you touched the 1700 this, this morning, early trade? And you can see, let's remove those pivots briefly here. You can see the extent to the move higher that we have got to, you know, levels from 2013 and a bit before that, 2012. So I think the interesting thing for me about gold though today is that we're actually only just above, you know, where we actually open. So for me, that's a bit worrying. That's a bit— hang on, look what happened on Friday. Look what happened on the previous Friday. You know, when you've got that period where all things are hitting the pan but you're not pushing higher, usually there's a reason for that. So I'm, I'm actually, you know, if I were looking for continuation in safe havens, you know, I'm looking at the yen, I'm looking at, you know, government bonds. I'm not perhaps looking at gold unless, unless we really were to, you know, technically get above Friday's high, an area of support we found this morning at 1690. I'd let the market tell me rather than be looking to buy lower down for, for this market. I think it's just a bit, bit worrying that we're not still up at those highs. Um, but what we've got now, 1 hour 15 to, to the open, certainly be, uh, yeah, yeah.

So just a good reminder there is that the US clocks changed yesterday. Our clocks don't change right until the end of the month, so we pretty much got a 3-week condensed time frame between, uh North America and London for the time being. So just, just do bear that in mind. So you've actually got the COMEX open on gold coming up literally in the next couple of minutes. So be quite interesting as we're talking to see how that responds at the open. But someone else, uh, Vern, just mentioning about the budget, the UK budget and the pound. I mean, that's just been bumped right down the order of play, I think, for what's driving this market at the moment. Uh, the budget Generally, in my kind of career, whenever I've watched it, and that being now 14-odd years, I think whenever the budget does come out, it does move, it can move things like home builders or anything related to kind of changes in alcohol tax and things like that, and respective names associated to these types of industries. But generally speaking, for the pound, it's quite unresponsive really, because there's nothing that really comes out that's quite shocking. Most of it is well telegraphed in the press because remember, the politicians want to be kind of— they don't keep it all back and surprise everyone. They're constantly trying to manage consumers' expectations. The only thing from a trading point of view, sometimes it's interesting if you're looking at gilts, you know, trading in fixed income futures, perhaps then what the Debt Management Office has to say about the amount of issuance can be quite interesting and move gilt markets. But there's just such a bigger story in town at the moment, so I don't really see it as something to get too bogged down in, to be honest. Let's have a look at— well, Sam can have a quick skim over the comments in the chat. I just wanted to quickly transition over the screen to have a look at this. This is looking at the global easing in 2020, so I'll just shift over a little bit. So this is looking at, um, central banks across the world have cut interest rates. Obviously last week you had the likes of, um, just increase, and we had the likes of the Fed of course with the emergency rate cut. You had the RBA, the BoC, and this week you've got the ECB. And the likelihood is that they will probably follow suit. Probably the pressure now, given particularly the moves today would mean that that would undoubtedly need to be the case. You've got the Bank of England on the 26th, so yeah, quite a few rate decisions to continue to look out for. But interestingly, overnight, following on from the $8 billion worth or so that Congress signed off last week, uh, in regards to a coronavirus kind of task force budget, the latest overnight has been the Trump administration is drafting measures to to basically blunt the economic fallout from the virus and its spread across the US with temporary expansion of paid sick leave and possible help for companies facing disruption from the outbreak. So, you know, a lot of conversation I have with people outside of markets is about this, you know, where— how bad does the virus get? And I think, you know, the problem we have in markets and also then with economies is that a lot of them, particularly in the Western world, are heavily dependent on the consumer. And one thing that was clearly evident at the weekend, I mean, where I live, the Sainsbury's was completely ransacked, which makes me feel slightly ill at the prospect that there perhaps is people who, you know, are old or ill and they can only get to the town like once a week, or they only get paid their their jobless benefit claims, and they can only get stuff on a specific day. And then there's people buying all the toilet roll, all the baby milk. I mean, but hey, the point being is, is that if the consumer becomes fearful in that way, then it can almost start to exacerbate the issue. If consumers lose confidence and then stop spending and these types of things, this then overlaid with the quarantine measures put in by governments, which is going to allow people to not be able to get to work, not travel, businesses not to be able to function effectively, the economies globally are going to suffer greatly on the back of that. So this is where that, obviously, the, the coronavirus live kind of map, if you like. So just refresh it, see if I can change the screens over just momentarily. This is what it looks like. So it's just updated actually from this morning. So I mean, numbers are still, you know, I don't say this without obviously paying note to how serious this situation is, but I mean, in the UK, in the US, we're still 280 and 566. But my view here is that both of these numbers will go well into the thousands, and I'd be unsurprised if the US figure goes into the tens of thousands. I don't think that's not what's not expected and priced into markets. It's about, well, what do the US do in order to counteract and contain that from developing even further, which is key for its implication and for how economically impactful it's going to be going forward. And that's what we're trying to judge at the moment. But all right, well, let's have a look, quick look, just go back to the chat. Is there anything else that we can do to help? We've got about 10 minutes left. So Sam, is it— unless there's anything else you want to add immediately, let me just have a skim through. So guys, get your questions in. Just also, while Sam has a quick scan over those questions, my colleague Eddie did a really great video. Obviously you're probably used to seeing me and Sam talking more about the macro, but he did like a micro focus on the equity sectors and how they've been impacting where the potential plays in order to offset risk and, and, and not just from a trading but investment point of view, how might you play to navigate the volatility that's impacting markets right now. So if you go on our YouTube channel, you can scroll down, there's like an insights section, check out that video, it's definitely worth a watch. He goes into things in a lot more specific kind of sector by sector equity detail. On a much more kind of micro balance sheet level rather than what we would do in a broader macro context. Okay, well look, let me—

Sam missed the oil short from his broker at 53. Yeah, I did. Yeah, that's still winding me up there, but there's been plenty more opportunities.

So well, just keep those questions.

Just gone through the open here.

Here.

So keep an eye, guys, if you are trading on gold and T-notes. Actually just coming off a tiny bit.

Yeah, just while— please get your any more questions in, but while we await that, let me just have a quick run-through of a few different things here. Switch screens, give me one minute. Okay, so Yeah, a few, few things to show you. First of all, for those who haven't— I know a lot of those names in the chat are familiar, so hope you guys are all doing well. I wish you all the best with not just your trading but just generally, as obviously the coronavirus is still an issue, a humanitarian issue first and foremost. So I just want to make that crystal clear. But a few other things just about our company and what do we do. As I said, first of all, if you don't subscribe to the channel, please do because we put out content on a daily basis. This is our company. We have a variety of different arms to our business. As you can see here, we basically have a small proprietary trading unit which we also work in trader development where we basically have a— if I switch over to this page here. This is our kind of professional trading arm, of which me and Sam are very much fully involved in. And so here, if you were interested in definitely learning about market fundamentals, which is what we specialize in, and it's quite a, I guess, a difficult area if you're a retail trader and you don't have direct expertise in that area. You know, you look online, it's very much more technically led. But for market fundamentals, we basically put together this full online program So if you just click this Start Now button, and basically this will take you through to a learn— e-learning portal where you can get your first kind of few lessons for free. So definitely worth checking out. And then we also have opportunities to come and train with us in London on our trading floor. So feel free to check that out. Otherwise, another thing that might be quite useful to you, every Sunday I basically issue a my thoughts for the week ahead from a macro fundamental point of view. That's the link to the blog post I've just placed in the chat, but I issue that every Sunday and some people find that particularly useful just in terms of preparation for the week ahead. And then Sam and I will do the, the morning market video in the morning. Other things that can be useful on Twitter, me and Sam both particularly active. So I mean, this is one thing, type of thing that I'll be sharing. A lot of people asking me about the specifics of when US equity index futures open. Obviously they've hit limit down in overnight trade across the 3 major indices. At what level is the price limit at the 7, 13, and 20% kind of resets at the cash open? So if you go on my Twitter account, you can find out all those specific specific numbers. So again, just hopefully trying to make life a bit easier for you rather than having to go to the CME direct. But I put out all kind of macro things that I see that I think might be quite interesting. So for example, there was a great tweet here looking at different US energy companies' breakeven prices and looking on the scale then, because a big question will be on a stock-specific basis, who could be quite susceptible to potential disruption from the risk of bankruptcy and therefore a big blowout in their credit spreads, which could be a key thing to look out for on the open on Wall Street later. Sam, well, I'll let Sam explain what he looks like apart from Jackie Chan.

Yeah, I love a good GIF just to make my payroll mornings a bit more fun. But yeah, no, the way I look at markets is more technically to enter, but still based on fundamentally what's driving price. So yeah, I hadn't talked about his macro menu, but that for me is something that has to be, has to be looked over on Sunday. And then, you know, what we, we do with the briefing, you know, helps set my bias of the day. But yeah, most of the things that I go through Monday to Friday is all going to be technically related in, you know, different areas to be aware of, levels where something could happen, like what we just went through there with different lines in the sand. Uh, yeah, when it comes to the weekend though, it's, you know, strictly Arsenal on Saturdays. But yeah, no, the— we have quite a good balance and I think it works quite well.

Cool. All right, well, um, just gonna say the final thing is if you have any further questions beyond this at any time ahead of the Open or during the session, feel free to leave a comment on the video. Yeah, myself, Sam, but also Eddie, who did that other kind of more focused on the corporate finance side, but probably answer some of those single stock questions in a bit more detail. He can also respond as well. All right, cheers guys, that's it. Thanks guys, see you next time.

See you next time.