Markets Today: From Robinhood to Novavax Vaccine

Okay, very good morning. It is Friday, 29th of January. Hope you're doing well. Thought I would start off with this fairly comical situation with this tweet from Robin Hood. Not the Robin Hood, the actual Robin Hood. And had to give this a shout out. This is the actual home of the worldwide Robin Hood Society, of course based in Sherwood, Nottingham in England. And they tweeted last night, lovely to have all these new followers. Can we just check that you're actually wanting to follow the Robin Hood Society in Nottinghamshire and not the Robin Hood app? Either way, big welcome from Sherwood. And yeah, I mean, what, how many followers have they got now? They've gone up to 33,000 Don't know what they were before, but absolute crazy, crazy, crazy town. But look, let's move on. And as much as we're going to discuss an update on WallStreetBets and so on, because it is definitely being a factor for markets for sure this week, let's just have a quick look at what's been going on. So we had a higher close on Wall Street last night, so a full almost reversal in much of the selling pressure that that took place the day before when that initial kind of more focused concentration of liquidation perhaps led some of that selling pressure. So on Wall Street, we actually closed up about 1.5%, the S&P, Dow up a cent, and NASDAQ up around 1.3%. However, during the Asia-Pacific trading hours, things have kind of soured again somewhat, and you can see here in these index futures, I mean, there's really nothing that's happened overnight, the Asia-Pacific session, but we've kind of reversed that gain. We're back to where we were. So quite seesaw price action seen across the board, really, uh, similar kind of price movements observed in some of the currency markets. So quite evident here in EURUSD, top left. Gold as well, it did ramp up at one point yesterday but then came all the way back down by the time that Europe exited the market. Oil as well, seeing similar type of price movement, but pretty much scratch from where we were just 24 hours ago. So Yeah, at the moment I'd say the market is in a little bit of an unusual price pattern. I think fundamentally, I mean, I'm going to update you beyond WallStreetBets on things like the vaccine. There's an update on Italy, there's some earnings and data coming up. But ultimately, I think at the moment, short-term intraday directional fundamental biases are pretty limited. Um, don't really see much in the way of the news, but also the actual cues of which market sentiment is derived from, um, is giving much clarity at the moment. So be very much more looking at the session ahead from a trading of the futures market, of just looking at solid technical areas of interest and generally correlated moves, and also Um, if you actually think as per what is normally the case, much of today's movement is more US-centric than in the UK European morning. And so I'd be looking for any kind of more directional moves to take place then, but not overthinking it really, and not trying to, um, I guess create any type of narrative around this movement, um, other than it is pretty, uh, indecisive at the moment. And I guess until this storm blows over, which is WallStreetBets and this, this kind of challenge from the activist retail market on these hedge funds, then the dust I think will settle inevitably on that and the world will move on. But at the moment we're kind of still in the midst of it for the time being. So yeah, a couple things to have a look at. One was I just quickly wanted to look at the NASDAQ because I saw some of the technical charts that a few of the guys were showing in the Amplify Live um, Discord room last night. And I put the NASDAQ on a 5-minute, and I thought the 5-minute was quite interesting because, yeah, really nice respect of a trend line in yesterday's session. And you can see here from then the acceleration in price movement that we saw going into the afternoon UK time, respected it literally to the tick in the morning when the US came in, and then really getting into the crux of the US session. And then as we come back down here on the 5-minute chart in the overnight Asia-Pacific session, where we found support exactly around that horizontal line that was again a meaningful level for this week going back to Wednesday and Thursday. So yeah, really nice technical response in some of these charts, particularly the NASDAQ, of which as well, one of the guys was also looking at the NASDAQ. I think it was here from a technical support line point of view. So if I quickly just take some of these off, I'll show you what I mean. Um, trend line, I think he was taking it from this low here and how well that's being respected as this NASDAQ has come off Certainly there's been some disruptions off these all-time highs, but I guess from a daily point of view, we've had 2 days of trying to attempt to break that downside trend line that's been in play really since going back to the 10th of November of last year. And if you remember, this is when we were seeing some volatility around the initial— this high here was the Pfizer, uh, first news and the positive vaccine that came out, which was rejected at the previous all-time high. And that horizontal level obviously is a really strong point on any breach of this. There's obviously a few areas to have a look at before we'd ever get to that point, like here at 12,906, a bit lower down then, just following the price movement. But a really strong area in that rectangle. But for the moment, that trend line is something I'd bear in mind if we were to see any further downside pressure, because it is in fairly close proximity to current price at the moment. So if we did trade heavy later may be worth bearing in mind because breach of that could just open up a bit of a deeper move if that were to materialize. But again, fundamentally, I don't have too much of a bias really. I'm coming into this just, just, just monitoring price action rather than any preconceived idea of how I think really today's going to play out. Um, but look, there's a few things that I need to, to talk about on this whole GameStop and WallStreetBets Um, actually, Eddie's gonna do another chat with me to update about some of these brokerages, which has caused, you know, outrage amongst a lot of these retail traders that have been quite focused on this concentrated, um, kind of sector of companies with high short interest. And let me just get you up to speed exactly what's been going on. I've written some notes here of a few things and a few points that I wanted to stress. And first of all, as you can see here, GameStop fell heavy yesterday, around 44%. And that came after Robinhood, Interactive Brokers, some others took steps to curtail activity in a lot of these high-flying stocks. So AMC, GameStop being some of the main ones. AMC were down about 57% yesterday. Volume also fell as a byproduct of that. To give context, there was about 55 million shares traded as of the afternoon on Thursday compared to Friday's record of 197 million. As you can expect then, the kind of self-entitled degenerates were just outraged. Twitter was just on fire, as were most social media platforms. There was lots of memes going around. I think the Robinhood app, which had like a 4.8 rating, has gone down to 1, for example, as the mob attack But lawmakers also had a thing to say about this as well. A lot of them were talking about this idea about how obviously in line with that, that crowd, that this is unfair, it's unjustified. You know, let's not forget Robinhood's slogan is to democratize finance for all, which is quite the opposite if you're banning these people from now being able to participate in the market seemingly after they've caused this type of disruption. A few other points before I get into some of the reason and rationale why they took that action. Goldman Sachs's basket of stocks favored by hedge funds— remember I talked about this the day before— that actually jumped yesterday the most since early November, having that prior day fallen by the most since September. So yeah, continuing to see some pretty seesaw movement at the moment. A couple things though to be aware of here. The action taken by these guys I don't think is that rare. I mean, this is some of the headlines here, and I'll talk you through what this actually means. So whenever there is extreme volatility, it is actually quite normal procedure for these brokers to look to protect themselves. I remember back several years ago when— before I worked at Amplify, the company I used to work for— we used to provide a service of of analysis and research. And one of our clients was a broker called Alpari. And Alpari was a substantially large broker at the time, and they were a fairly large client for us. They used to then use our research and pass it on to a lot of their kind of clients. But when the Swiss National Bank dropped the peg on their currency, you remember when the 1.20 floor went, they were so ill-prepared for the extreme price reaction that that created that they basically didn't have the margin and couldn't cover that, that move. And actually, they went from being a huge broker to going bust in literally a matter of minutes. And obviously, it was a thing that stood out very much so over the years, having seen that, you know, a major-sized client just get annihilated by a market move in a matter of minutes. So, you know, them taking action, the likes of Interactive Brokers, Robinhood obviously is the one that's in focus, giving this kind of low-commission new culture that's created easier access to these markets. And what this has led to then is the Depository Trust and Clearing Corp— they're, they're kind of shortened to the DTCC— they said to have deemed significantly more collateral from its member brokers because of this excess volatility at the moment. And what Robinhood is said to have done, the FT citing people for the matter, was that at least $700 million were drawn down by credit facilities with a number of big Wall Street institutions like JP Morgan, Goldman Sachs, Wells Fargo. This of course has created then a narrative for conspiracy that you know, this is the brokers protecting customers is a facade then for facilitating more, um, better relationships with their institutional backers, because obviously they're getting these credit lines from Wall Street in that respect. But quite honestly, I think if you cut through this kind of very emotional situation that these people are expressing at the moment, and understandably so, You know, it's not right that they're not able to exercise their freedom to operate in the market and do as what they say in the truest sense. But, you know, the reality is that this is a purely operational risk reaction from these particular companies that facilitate this type of interaction in the market. So it sucks, but, you know, as far as these kind of conspiracies that no doubt will go through these online message boards. I mean, I think you're getting a little bit carried away there. This is just a natural order of how these things work. And so yeah, I mean, a political context as well. I think there is a little bit of read across. Um, wrote some notes here about how, um, I saw one person commenting, I thought it was a little bit interesting, that it's better to face If you're Robinhood, it's better to face the anger of your customers now rather than let this thing get even bigger to then ultimately, when it does harm, probably then not the more sophisticated people who are into this trade doing these types of plays early, but when the mass start jumping in who are uneducated about exactly what it is they're doing and they get harmed financially and badly, it's the company that will be held accountable. So, you know, is it better to take action now before the beast gets so big that inevitably it's going to go bang in the future and the company's going to cease to exist, full stop? So could well be that they're going to accelerate that now given the outrage that it's caused, but I think again it's probably a necessary thing for them to have done. So the other thing that did happen last night that you should be aware of was that Robinhood actually did come out last night and they said that they plan to allow limited buys of these securities, these securities being those ones in focus like GameStop. And they said they'll continue to monitor the situation and may make adjustments as needed. That actually saw GME shares rise over 60% last night. So they fell and then they've risen up late hours and reversed that entire decline that they did see. So worth bearing that in mind. So all in all, look, Eddie's going to put out an update on this. I'm not going to talk about it any further for the time being. Let's talk a little bit about vaccines. Just some quick updates on some other things. This is just a further follow-through of the story that's been developing throughout the week. EU governments under fire over the shortfall of deliveries from the likes of AstraZeneca that use Executive Arm today will require companies to seek to ship their inoculations outside the bloc or require them, excuse me, to seek basically prior authorization. And this is that idea about a degree of protectionism with EU feeling unjustified that a lot of these pharmaceutical companies are woefully short of their delivery targets that they've initially promised. So yeah, just the latest update on what's been a developing story. Perhaps the more interesting one on the vaccine front is one out of Novavax. They've said its coronavirus vaccine was 89.3% effective preventing COVID-19 in a trial conducted in the UK and was nearly as effective in protecting against the more highly contagious variant first discovered in the UK, albeit against the South African variant it was a little bit lower, down at 49%. But this, you know, this is meaningful. It's the first kind of real credible study that we've had that really goes into greater statistical detail on the effectiveness on the new variants. And the fact of the matter is it does work on these variants, I guess, is the bottom line. So, you know, good on twofold, two different fronts. One on that side, on the effectiveness on the variants, and getting some concrete clarity on that. But two, just more vaccines coming to market obviously is going to be beneficial for the overall distribution globally. Quick look then at the calendar for today. Um, as far as this morning is concerned, you've got the German data coming out later on this morning. So, uh, 8:55, you get the unemployment rate out of Germany, followed by then the German flash GDP number for Q4, which we're expecting a flat reading after the bounce back that we had of 8.5% previous. Um, and then going into the US afternoon, you've got Core PCE, Chicago PMI, and the Jan final University of Michigan figure. Again, from these data points, I'm not expecting too much in the way of reaction, even though these would typically be quite important. I don't think they really, in context of the recent FOMC meeting this week, are going to be game changers for that thinking of what the Fed are going to do. So as a consequence, I don't think that unless there's a market technically hit, hanging on a precarious level, let's say, of support or challenging a resistance point, I don't think beyond just being a spark of catalyst of price movement, these are really going to define the session for today. But nonetheless, I think definitely around the 1:30, 2:45 Chicago PMI, you need to be aware that those things are coming out. Probably the open on Wall Street more interesting just to see given the volatility that we've had. So monitoring that timings-wise as well as the correlation mix, just generally to get an idea of how sentiment is playing out. Earnings-wise, uh, you do have a few to look out for pre-market. Caterpillar is probably one of the more interesting, and then Chevron, Honeywell, some of the other large-cap names as well that are coming out. One other final piece of news as well, just looking at BTP's They have— BTPs did break out of their, their range late yesterday to the upside, so yields coming down a touch in Italy. We did have comments last night that the Italian Viva leader Matteo Renzi, the one who initiated this whole new political instability by pulling his junior coalition a few weeks ago, he has said last night he's ready to help form a new government, and he refers to a political government but would also back a technocrat government as well. And so this comes as obviously Conte is trying to look to form a new-shaped coalition government, and getting Renzi back in could be a way of doing that. And that averts then, or let's say lowers the probability of snap elections, which is perceived as a more net positive short term for Italian assets. All right, that is it. I'm going to wish you a good session ahead and a great weekend, and I will see you in the Discord room on Amplify Live. Thanks very much.