May survives.....again! Stocks at Key Resistance

Hi guys, good morning. Thursday, 17th of January, just gone half 8 here in London. And as you can see from the main headline on my screen there to the left, Theresa May survives Labour no-confidence vote. We'll come on to that in a bit. Market reaction actually quite limited, so we'll look elsewhere. We'll have a run-through of what happened overnight yesterday during the markets, market hours as well, and we'll have a look forward to what could drive price going forward for the, the remainder of the session. So just switching back to the, the charts from yesterday, data-wise— or actually, I can bring in the, uh, the calendar from yesterday. We had some inflationary numbers out of the, the UK at 9:30, which as you can see, some were in line, some slightly better, some slightly worse for the UK. Obviously the main focus was always going to be, uh, on Brexit, uh, the no-confidence vote which was scheduled in for yesterday evening. And you can see just if I highlight the area here, uh, of that data release, uh, and the sort of the hours before and after, you can see nothing really happened. And actually how it remained for the rest of that day, price was contained within the, uh, the range for sort of— if we're looking here on the future between 1.2938 and below that 81, sort of a 50-tick range, which if we look at the, the previous day, you can see just how, uh, much more contained it was. Quite a key resistance level to keep an eye on, which we just couldn't break above. And, and the same was, uh, for all the other, uh, UK, uh, pound-related, uh, pairs. I know personally on my Twitter I was looking at, uh, pound against the Aussie and yen, both to a broken higher and look to test those previous highs of the week, much like cable here. But we never really got the opportunity to sort of extend a push higher. So for now, worth keeping an eye on, on those levels should we push on. We'll come on to sort of what could happen next in Brexit, but for first briefing in a while, just going to push that to, to a side as there is some other interesting points in the market which could dictate other assets, especially if we come on to the S&P in a moment and that key resistance level which we were sort of flagging all week. And then Twitter had also been talking about it a lot. We, we touched that resistance point yesterday, so where we go from there may also dictate price quite significantly. Other data points to be aware of yesterday coming into today's session, if I just lower oil down, we had the the usual DOE numbers, uh, at half 3. And the red candle that you see here is, is that initial reaction. Yes, we had pared the loss since then, only to come back and, uh, sort of gradually grind below $52 again. Uh, the reason being the, uh, distillates and gasoline had a rather big build, or more than expected. And, and since then, uh, you can see we are just sort of drifting to that lower point of the day again. Another market just to keep an eye on in the morning about where we go. More importantly, if I had to switch over to the S&P on that daily chart, you can see here if I just move the, uh, chart to make it smaller just so you can get everything in. We had that trend channel which worked fantastically well on the break and retest on the 17th of December. That sell-off continued all the way down to Boxing Day, and just like the previous chart we looked at, recovered there with, with oil. And it's Yesterday touching the retest of the trend line pretty much perfectly. We had a couple of tests post-cash open, it just couldn't get through. They also had the 50 DMA and of course, you know, some previous support turn resistance levels, uh, before that breakdown early December as well. So massively important. And why I've decided to sort of talk with this rather than, um, than Brexit is just the implications this level could have going forward for other markets. We've seen that recovery in oil as well. I think a lot of this, uh, S&P recovery was due to oil recovery. So $50 to $55 in oil is quite key. I think if we get above $55, S&P does go higher. If the S&P goes higher, I think you could have a positive correlation that would come through to, say, the, the Aussie dollar. Most likely the reasons behind a push higher in S&P is going to be because of, well, oil recovery. So you've got that commodity correlation, and also because trade talks are now more positive than what they were. So therefore China is going to be pushing higher. China-Australia, good correlation there as well. If the reason perhaps is more down to the recovery of oil, maybe, you know, OPEC announcements or the DOE releases, if oil was to push above 55 and S&P likewise was to follow, you might have a good opportunity whereby the CAD against certain currencies also recovers as well. Other correlations, obviously with the S&P, you're looking yesterday at the Dow Jones and the NASDAQ. The NASDAQ will go to first. You can see, uh, similar sort of time on that cash open, pushed higher to drift down, and we are now lower. A bit to do, um, with the, uh, the oil perhaps, uh, pushing lower for the S&P. But really, it's just a case of that technical level just working really well. The outperformer in the US yesterday, uh, was the Dow Jones. So if we just switch back over to a couple of the headlines yesterday, you had Bank of America and Goldman Sachs produce really good earnings. And where, you know, Goldman Sachs in particular had a one of its best days in, in a long time, and that helped push the, uh, the Dow Jones. Obviously the, uh, the banks sector within the Dow, obviously quite a big component of that, and helped push us to, uh, you know, the highest it's been for, for quite some time. And other reasons other than the sort of the technical resistance, uh, and or a technical push that we could get higher, of course, is earnings. And we've still got a few interesting ones to come out today, you know, notably Netflix, which, uh, sort of attributed to the push higher we had, uh, in markets, uh, on the Wednesday— Tuesday afternoon. Here you can see just where my, my mouse is. This was the raising of prices pushing higher. The NASDAQ, obviously you can see, pushing the most due to the sort of tech sector. So those earnings out today, which would be quite interesting and could be a reason we, we do get a retest of that trend line. If you're, um, on Twitter and, and certainly recently, even though we've had this, you know, recovery, which if we have a look at the percentage from that low to where we were, I mean, that's a 13-14, uh, recovery, you know. Even every day, oh, it's coming lower, it's coming lower. Well, this might be now, uh, the point where it does drift lower, but earnings could be a reason as well we look to push higher. So earnings, trade, and oil for me short term are going to be the, the sort of catalyst whether this can continue to push higher, uh, or, or not. Dollar yesterday quite sideways, you know, a few of the pairs notably obviously the pound as I mentioned pretty sideways in, in price action, but the, the EUR/USD the same really, nothing notable, uh, data-wise to, to sort of focus on there. In New Zealand they had some weaker data, and actually of the, the markets in, in general, currency-wise, uh, was, was struggling quite a lot. Uh, the break of the S1 down to S2 happened very quickly, uh, in the morning, sort of 9 o'clock, 10 o'clock time, uh, and that obviously weighed, of course, on the Aussie dollar into the sort of the, the late morning as well. So that correlation still, uh, one to keep an eye on. And with S&P finding a bit of a ceiling and Asian stocks in general just struggling for momentum this morning. Uh, one to bear in mind going forward that this actually might start to drift lower. And you can see, looking like it's just starting to find a top. From a support point of view, if I just refresh this chart here, you've got those lows that we had back on the 9th of January were also the highest from the 7th and the 20th. Really key level for, for the Aussie. I'll be taking, um other markets for the sort of the lead of where this goes here. If S&P comes lower, if the sentiment worsens in equities, that correlation would be something I'd be looking for, uh, for, for this to, to break lower. I mean, if you were to not have the, the numbers on the right, right-hand side or the chart name at the top, you could argue that this is actually in fact oil or S&P chart itself. Speaking of sentiment, uh, this morning, um, A couple of sort of headlines that are coming through, whether you want to read too much into it, uh, for the reason equities are coming down or not. Federal prosecutors investigating, uh, Huawei for allegedly stealing trade secrets. So this is sort of weighing on, on sentiment a bit. I think this is more a case of just how important that, that S&P level was. Bit of profit taking, people that also want to get short getting involved again. Uh, but you are going to get obviously headlines that do come through. They're not just going to put down the, the reason equities are down is because of a technical level, uh, if you like. But going back to, uh, you sort of the, the moves that we've had at the beginning of the year, I do feel, well, you know, while they've been some significant ones— oil, S&P, Aussie dollar, um, as well, just, just to name a few— it does— and gold, of course— it does just feel like we're just erasing some of the, the losses that we had into the back part of the year. Pricing in of the recession has now been pushed back. If we look at the US 10-year futures market, you can see the recovery again that we've had in this has been pretty incredible. If we go back to pretty much, well, almost a year ago today, you can see that's when it really started to to come back lower. And now, well, as of a few days ago, we just hit a massively important level, which was the low that we had back in December 2016. So something not seen for, for quite some time, and quite indicative that that recessionary sort of timeline has been pushed back. And S&P, that recovery you're seeing in the same sort of vicinity there, as the market is expecting central banks to to sort of, uh, well, loosen a bit more or be more accommodative for a longer period of time. The Fed in particular are still coming out with these dovish comments. Just looking at the calendar for, for today, it's actually relatively quiet in terms of market events that could drive price significantly. You've got a bit of data out of Europe at 10 o'clock, but nothing I would expect to really move things. Going into the afternoon, you've got your weekly initial jobless claims numbers, which are still quite strong, but again, is it going to take a lot for that to be the driver for the remainder of the day? Um, speaking of those sort of dovish Fed comments that have been coming out, you've got a couple of Fed speakers to be aware of, and you've also got Carney speaking at 3 PM UK time, something again to bear in mind. But ECB speakers, Fed speakers, Bank of England and Bank of Japan later today, all coming out. So opportunities off of those comments, uh, something to, to bear in mind, um, uh, as well. Just going back to, uh, obviously the, the main— well, arguably the main headline, uh, from, from the night, even though the market reaction— let's have a quick look at that reaction, uh, was very limited. So 8 PM was the, the no-confidence vote. Let me just get the pivots on to make this a bit clearer. And so here, if I just rectangle that area— so this is yesterday's price action within the rectangle. You can see a slight spike into sort of the, the result as it came out, but very, very limited. Not much doing there, uh, as expected. 95% was the, the sort of the rumors, uh, going into, into that, that, uh, Theresa May was going to be okay and, okay, and survive the, uh, the vote. And, and she absolutely did. Markets sort of had priced that in really, uh, from the, the back end of, of, uh, of Tuesday's session, uh, following the, the meaningful vote, which of course recovered, uh, as we look down here near 127 all the way back up to, uh, 129 and beyond. So that range from a technical point of view, still very, very relevant today, and I'd I'd be sort of interlocking that with the low that we've just seen. If I just move this rectangle this morning, which is yesterday's low, if you want to be super safe, and it might be prudent to do that when trading the pound, just sort of extending that to the highs that we've had this week and waiting for, for a breakout, uh, of, of that, uh, as well. So yeah, just seen in the chat, just to confirm that Netflix are coming out today. but also you've got Morgan Stanley said Dow Jones, one to keep an eye on, American Express and PPG Industries, uh, as well. Um, how did the voting, uh, come out? Let's have a quick look. Obviously the, the main number she needed, she got 325 to 306. The vote had come in and you can see, uh, obviously the historic defeat that we had on Tuesday evening. Used up another one of her lives, and yesterday another one as well. She cannot have too many left, but it seems like she's going nowhere. I think if anything, she deserves praise for that. The problem, I think, going forward— and people are obviously quite sick of Brexit, I think that's really the main reason I decided to start The Briefing Elsewhere— you know, she can't even get her own party to to agree and back her. So I don't really see how she's gonna now get the other parties to come together and put their individual differences aside, which is one of the headlines I saw. I think that's just wishful thinking. Um, quite a good, uh, piece on the BBC this morning, uh, on sort of what happens now. Let me just copy and paste that into, into the, the Trading Live chat for you guys to have a look over. Um, obviously posted yesterday. But you've got the sort of options going forward, and I think these are the sort of scenarios I would be looking to plan from a trading point of view. Uh, you know, no deal, how that could impact the pound and where we go from that. I know people on Twitter have done their own different scenarios, and I think it's a good sort of way to plan for anything because obviously these comments that are coming out throughout the day. As we saw, if we just go back actually to, uh, the Monday here where the— I'll circle, uh, the area when you had the rumor that ERG are gonna, gonna back, uh, back the sort of the meaningful vote. And that's when you've got a significant reaction. So what's moving the pound, certainly against the dollar at the moment, other than maybe the dovish Fed speak is these rumors that are coming out, comments from, uh, your sort of influential people on Twitter like Laura Koonsberg or even Peston as well. As much as I have my different opinions to him, he, he moved the market there on the Monday from that tweet. And these scenarios that could develop are all ones to be aware of. So obviously no deal, second vote for, for MPs, you know, they're obviously going to come together, or supposedly going to come together, albeit without Corbyn at the moment to sort of, you know, wind their necks in and perhaps to sort of go down that route. You've also got the major renegotiation, which of course May again reiterated yesterday that the deal is going to be done by May 29th. I think actually I've still got a graphic up here. Is that coming to picture? Yeah, it does. Where UK to leave the EU by the 29th. You can see, and this was yesterday afternoon, um, at 84%. Someone on the 7th of January, so 10 days ago, when it was in the 40s or 50s, I believe, percent chance, uh, tweeted, it's only gonna go one way. And of course, that person was our very own, uh, Anthony Cheung, who I'm sure, sure some of you are missing this morning on the briefing. Um, unfortunately, I had to substitute in for him today. He will be in, uh, later. But yeah, this has continued to go higher. So, you know, the, the options as we go down, I think, are only going to increase the time and that extension. As you see here, uh, if there were to seek negotiation, it's, it's going to be a longer process, and you're looking maybe more June, July, which, uh, as the— as I checked the, the odds yesterday on, on OddsChecker of when we would leave, it's is pushing more that way, and actually, you know, not to leave in 2019 is not a bad bet to have at the moment. Another referendum? I can't see that happening from a personal sort of guess, if you like. I think everything at the moment has to be a guess with Brexit. I still, on important days like yesterday and the day before, my friends in my football team are messaging me like, "What's going on? How has she survived another?" no confidence vote, and, you know, the market didn't even really move yesterday. But for there to be another referendum, which, you know, a lot of people do actually believe will be— will happen, I can't really see that being the case. I know Theresa May has gone back on her word multiple times, but for her to say, you know, that there will constantly not be another referendum, I— you know, she would have literally no leg to stand on. There was a couple of rumors going around last night that Theresa May was gonna plan to do another general election. I don't really see that being any benefit for her, and I think if that was to come out, the initial reaction for the pound would be, would be weakness on just that more uncertainty. You saw some supportive tweets from, from Europe yesterday saying, you know, fair play to May, you know, Europe wants to see that consistency in the top. And I think, you know, with the, with recovery that you saw, just going back here to the chart now, on the, on the Tuesday evening, a lot of that is down to the fact that Theresa May is going to be sticking around. So a general election, I think, is just going to weigh on that uncertainty, and we do drift lower. And I think 127 below becomes an option pretty quickly. I'm just going back down to that general election is number 5 on that list. So Please do, you know, in your own time have a look over the, uh, the article. It is a pretty good one. Obviously need two-thirds of MPs to approve to get that. Just on the, the no-confidence, uh, vote, while the, you know, the government one back in, um, early December cannot be triggered for another year, Labour can do so, uh, again at any time. And of course Uh, if we just go back, it's in here somewhere. I was reading it and maybe it wasn't this article, but they would have 14 days to see if any other government, or if the government, can win back the confidence. So it wouldn't be a straight thing of once that no confidence vote is triggered, say by Labour, that it's the end of the road for May. She would have 14 days to recover. But again, that could be something that happens again, although the reaction that we saw yesterday was very limited. And I think for now she would win another no-confidence vote in the future. Number 6, here you go. Yeah, yeah, another no-confidence vote. So interestingly, yeah, the MPs vote for the motion, it starts a 14-day countdown. If during that time the government cannot— if the government or any other alternative government cannot win a vote of new confidence, then an early general election would be called. And for me, yeah, that's, that's bad news, uh, if it was to get to that stage. Uh, while I'm from a, you know, if we just put the pound on a daily chart and you can see some annotations that we've had on for a while that Anthony Cheung was sort of having a look at yesterday, I think if we were to go down those routes of, uh, sort of delaying, uh, the vote, but more so to do because a reason of a general election or another referendum, I think the pound would, would weaken into that. But I only see, uh, this time next year the pound to be higher. Of course, there's, you know, multiple sort of swings and roundabouts before we get to that point, um, but it's nicely sort of positioned now, isn't it? You can see that trend line that comes down the sort of low that we had back in July, also October, really key level, and the psychological handle of 1:30 as well. Just having a quick look over that calendar one more time just to wrap things up, you know, in terms of sort of points to make in on your notepads or whatever you guys do. 10 AM, something just to have a little asterisk there for European assets, 1:30 for US, and then really it's sort of quiet from a data point of view until, until this evening. And then obviously got some speakers, uh, out as well. Dollar index at the moment still above 95, relatively unchanged, uh, so far. For me, the key market I'm keeping an eye on is the S&P and that level around 2625 and that trend line. Of course, obviously the longer we go, the higher that trend line will get from that trend channel. But just the implications it's going to have on oil, on the Aussie dollar, on the Canadian dollar, on China, on other US equities for me, you know, really, really key level going forward. Gold is an interesting one for me, just to, you know, on that final point, the, you know, gold has recovered quite nicely, more in my view to do with, uh, the dollar weakening. But if we have a quick look at gold's journey over the last sort of few weeks— let me clear that up— obviously this was the the key resistance and support level we had talked about for, you know, multiple, multiple briefings. Now we're above that, and you've got 1,300 as a, as a bit of a resistance point, or a bit of a key resistance point. We are starting to get squeezed in there. If we were to see equities push above the, the said resistance line, what do I think gold will do? We obviously, you know, being a sort of safe asset, and risk assets of course would follow equities. I think gold is, is something you just want to focus on here, purely to do with the US dollar, as was yes, as was last year. A lot of the move lower in correlation at times when equities was coming down was due to the strength or weakness of the US dollar. In this case, the strength when it was coming down. So for me, rather than sort of traditional risk-on, risk-off theory, it's a case of is the dollar going to weaken a bit more or is it going to strengthen? Opportunity-wise, above 1,300 as a long, I like the look of it, or a break of that, that trend line that you can see drawn on, uh, there as well. Either way, it feels like perhaps the— it was a relatively slow start to the year for markets. It does feel we're technical breaks away, uh, from it getting quite interesting, uh, again. Uh, but I'll post this obviously on YouTube as usual. Straight away for, for anyone that has joined late, uh, but Anthony will be in the office in a bit and we'll be on the mic throughout the day. But if I don't speak to you, hope you all have a great trading day.