Morning Briefing - 18th September 2018

Hi guys, good morning. Tuesday, 18th of September, just gone half 8 here in London. You'd be forgiven for thinking, uh, it is very much risk-on. DAX on the highs, S&P on the highs. If you have a look at the NASDAQ over the last sort of couple of hours, on the highs. Dow Jones going through the pivot on the high as well. So we'll come on to exactly why these markets are moving this way. Of course, we had the the trade talks escalating last night and again into this morning. And we'll have a quick look at how the market reacted to those stories on Trump, uh, confirming the tariffs on $200 billion of Chinese imports, 10% from the 24th of September, so 6 days' time, and then 25% next year. We'll have a quick look at how the markets traded yesterday, uh, before going into what happened overnight. So I'm just going to bring into the pound against the dollar here. So yesterday morning really kicked on with dollar weakness. The dollar index, you know, now back below 95 consistently, uh, pushing to new lows, and the pound benefited from that. We had a bit of Brexit talk but nothing substantial like the previous couple of weeks, and we pushed above the pivot at the same time other FX pairs were doing similar— euro, the Aussie dollar, Gold as well benefiting, and oil, which we'll come on to as they continue to push on, making a new high for the, the week or the last couple of weeks, breaking above Friday's high before sort of just slowing down around that. But I know a couple of the guys, uh, got in that trade as we broke above what was the high of the day. As you can see here, that continued, uh, throughout the session. Same story for the euro, breaking above to then sort of find resistance around what was you know, a bit choppy around that R1. And we'll have a look at the longer term charts which I sent out in the strategy yesterday. We're coming to some interesting levels in both the pairs, and we saw a continuation of that dollar weakness from early morning into the afternoon, and that helped gold price push on. I know a few people were interested in the R1 as a possible area to get short with the Friday lows around there, and it would have been a good trade. And you can see Again, the pivot which offered little resistance for pound and euro. Same sort of scenario here for gold as we then pushed higher to then drift back lower, uh, as the dollar, to be fair to it, did recover slightly. Uh, oil yesterday, uh, up and down price action. The low of sort of Friday evening containing, uh, the down moves into the sort of back end of that session and the The high, really you could say that was also low of Thursday, and then the high of Thursday evening contained that as well. So oil on Monday, usually not the biggest mover anyway, but, uh, up and down price action going in there. T-notes, we saw the yield go back to that 3%, which caused all that panic back at the beginning of the year. Um, however, we, as well as the Bund, if I just bring this down, we did push lower in T-notes in the morning. And the Bund, you can see, I just highlight that area, same sort of, uh, picture there as, as, uh, bond price falling. However, going into the afternoon and, and what was the main story over the last sort of half a day or so, the, the sort of tech sell-off, uh, with all these, these tariffs looming, uh, weighed on the NASDAQ here. And you can see just the, the push it had. It was really triggered from that cash open. So 2:30, we had a break of not just this trend line but the lows of the day as well. And it continued, um, well, well into the back end of the session, finishing pretty much on its low of the day when the session did finally close. You see, we broke through all different kind of supports. Well, we held briefly and they offered a good opportunity to then get back in again. You can see pretty big sell-off. If I just switch over to show you picture just of the, the S&P, which I'll come on to in a moment. There you can see the chart, but you can see here the, uh, the map of the companies within the S&P is a sea of red, really, especially in the tech side. Services down, Amazon, Apple. Amazon finishing just over 3% down and Apple 2.6%. We'll come on to Apple in a bit because it might just well be that— well, as you saw already this morning, we've missed the opportunity But, uh, equities pushing through the high, and Apple not necessarily going to be involved in this continued tech sell-off perhaps. But going yet back to the charts here, you can see same scenario in that trend line breaking on the cash open. Decent opportunity as it retested that along with previous support, having broken through, turned resistance. We then continued lower, and same scenario as the NASDAQ finishing on the low of the day. With the sell-off really, um, starting from tech with the NASDAQ leading the way, uh, it obviously weighed on the S&P but less so on the Dow Jones. However, if you're looking at this chart, you'd, you know, not necessarily believe that. But if we go down to when we had the, the cash open, 2:30 UK time, you can see would have been around this area here circled where we actually pushed on to make a new high for the day. Um, it was until— wasn't until really that NASDAQ and S&P were far below their original lows, that the, the Dow Jones also followed suit. And you can see going into overnight, you can see just, uh, back to 26,000 in the futures there. The DAX from yesterday morning, well, into the afternoon, was relatively quiet, more getting dragged around by US equities. But we did have a nice push higher early on, just, uh, after the open. We filled the gap relatively quickly, found a bit of resistance, and came back to pretty much exactly where we were. I mentioned in the chat yesterday about the DAX. You can see where my mouse is here. We're trading the September contract for the S&P December, Dow December, NASDAQ December. So the rollover is coming, so it's always a tricky time to trade the DAX, as if it wasn't tricky enough anyway. Um, but you can get unusual price action for no real reason. And that's perhaps what we've seen this morning, as we have completely broken through all those highs from yesterday and last week. In the bigger sort of scheme of where are we trading, you can see where we have been coming down for a while, but starting to recover a bit now. The DAX at highest levels, well, looking to almost fill that gap. You can see on the futures that, uh, from the 4th of September. So worth keeping an eye on that, but as well, just be wary of, uh coming into that sort of contract rollover, you can get this unusual price action. Uh, going over to the main stories, um, it's all about Trump's comments after hours. He, he mentioned whether he knew that there's extended hours for electronic trading or not, uh, is a valid question. Uh, but yet raising the, the tariffs, confirming the tariffs on $200 billion worth of Chinese imports, 10% now or in 6 days' time, the 25% next year. Uh, I think, you know, the, the overall reaction that we saw in, in markets was quite limited. Uh, is this priced in, I think, is what you have to sort of be asking yourself. Was it actually going to be, uh, a bit worse? You know, some people were expecting more than 10, uh, originally now, and I think that as that showed from the markets, if we just have a quick look back now, you can see Well, obviously it's moved, not necessarily the DAX, but the S&P has recovered quite a lot already. Half of that move, we're back up to the pivot. The NASDAQ, same sort of picture and pushing on to the high of the day, and the Dow as well. You know, sell the rumor, buy the fact, perhaps. You know, if we have a look, it's not like this is the first time this year we've had trade talks going on, and look where we are on the longer, you know, term picture. We're, you know, near those all-time highs. Is this priced in? I would say to an extent it is. You know, is yesterday's high going to be the high for the year? I'd very, very much doubt it. Um, interestingly, I, I talked about, uh, Apple yesterday, um, and one of the, one of the headlines sort of coming through the wires yesterday as well but didn't really follow through to benefit Apple was US will spare some Apple products from new China tariffs. So some of the watches AirPods that I know everyone's wearing these days, or Fitbits, etc. That's all going to be spared. So while we're looking at that map again, you see Apple was down just over 2.5%, really being dragged down, I guess, elsewhere. It might well be that— is our US equities really going to sell off without Apple going down? Is this now an opportunity to get back in? And, you know, me and Ant were talking about this earlier before, um, before this— I guess while this move was happening in US equities, but just as it was sort of breaking its high of the day, as you can see on my chart now, just as we are breaking here. And you know, not to say that the pivot's not going to be the high for, for a while, you know, it is, you know, technically quite an interesting area, uh, above here from sort of previous lows, but I think it's, it's pretty much priced in. You know, the Nikkei is highest level yesterday since, you know, February. We knew these comments were coming, people were expecting it. I think they, you know, wanted to see, uh, for a bigger sell-off, you know, more, a higher percentage, and, and that hasn't really, uh, really happened. If we look at, you know, the, the sort of the short-term impacts of the dollar as well today, you can see, um my top 2 charts, the euro and pound just coming under a bit of pressure, and that is just due to that sort of dollar strength that we can see. But over the last few weeks, the dollar has been weakening against those pairs, and gold as well. Some of that bit of dollar strength coming, uh, through its low, but starting just to, to pare back, uh, a bit of those, uh, losses, uh, as well. T-notes, uh, which came under a bit of pressure this morning, uh, it's now decided to recover a bit. If we have a look as well at the, the sort of the longer term charts, and, you know, thinking about the dollar here, where we have seen over, you know, the course of the year, um, and recent times with the trade talk picking up, initially we were seeing the dollar strengthen amongst other reasons as well. You know, you know, looking at the pound here, it wasn't exactly like the pound was, was strong at all, uh, but you can see we've started to recover really since the sort of the middle, uh, of August, but to the back end. And, and we're now at quite an interesting level. We've just had the contract rollover today, uh, in the pound, hence this gap that you're going to see in the continuation on your futures chart. But worth having the, the 100-day moving average on your, on your charts today. As you can see, we're just finding a bit of resistance on there. Um, scrolling back to see how useful it has been. Let me just bring that into picture. You can see back here in October 2017, really good support. You could argue, you know, we didn't really get a decent close below back in August. And again, good support here in June last year. So I'd definitely be looking to have that 100-day moving average on. Uh, whether it holds as resistance or not remains to be seen. You've also got that trend line in the mix, uh, as well. But while the, you know, the trade talks are you know, coming out, you're going to get this sort of short-term dollar strength, I believe. But my personal view is, is this is going to be short-term to then continue these, the direction higher, and not just equities but maybe a bit of the sort of dollar weakness, as it's maybe not as bad as people may have wanted it to be to get this continued move. Euro as well, you can see, um, just gapping higher on that new, uh, contracts. But obviously that's, you know, no other reason than that, but quite a key level on your continuation, which of course longer-term traders will be looking at. You can see just how key this area has been, 118 in the futures. We had massive resistance all through July to the back end, and, and again, that's sort of where we found resistance up at the top today. So keep an eye, uh, on that, uh, area there, especially if we can come back and test the 100-day moving average on the other side, which has offered— if I scroll back again— quite good reactions not as support but as resistance here where we broke through, uh, and then you have similar sort of moves. So one to keep an eye on for, you know, the dollar, you know. At the moment we are just actually recovering a bit over the last sort of hour or so of, uh, you know, the retaliation comments that we had from China. Let me just bring that into the picture. So of course we had the, the tariff sort of announced yesterday, uh, and then I would say probably just after 8 o'clock this morning China says it has no choice but to retaliate against latest US tariffs. But you know, kind of what we expected. It was always sort of almost priced in that it was gonna— they were gonna go tit for tat, if you like. Um, quite an interesting article. I know Anthony posted this in the, uh, in the chat later, um, earlier, sorry, and in the research here. You've got actually the picture within the article and you can just sort of see, is it already priced in? No losses for Asian stocks after 200 billion tariff announced, you can see how price was coming down. And then, you know, sell the rumor, buy the fact. Wasn't necessarily as bad as people were expecting. But what next for China? What else can they do? Um, uh, you know, this is where it gets interesting. Uh, you know, China, who have arguably devalued their currency, they might look to do that, uh, quicker and further. Um, but of course, you know, they're gonna effectively run out of products to impose these tariffs on soon. So where they go from here, I think, will be the next sort of driving force. To release comments, say they have no choice to retaliate, fine, but you know, what are you going to do? For now, I, I do believe short-term recovery, and we can go a bit, a bit higher. So something just to bear in mind there. Focus, I think, really has to be on those US equity markets this morning. and also maybe looking as well at the sort of the strength or weakness of the dollar for an indication. I've had written down earlier, or wrote down earlier, uh, in my sort of plan of potential trades for today, you know, you're going to have this dollar strength come through from the trade talks, but actually what might be a good opportunity is when it sort of dies down to get that reversal. You were seeing it in equities already, so if I have a look at maybe more intraday, it's— well, let's have a look at the euro, where I would be saying, well, where could be a good place to potentially get into to get this reversal and get really this continuation that we've seen over the last sort of couple of weeks or so of where there's been a bit more aggressive buying. You know, yesterday morning's high, which is effectively around yesterday's pivot, you can see really nice area, 1.1735 on the futures along with the pivot. Not a bad place to, to sort of get in if we can hold that. The pound, which arguably has been more, more, um, uh, more susceptible to a move higher. You know, we— when we do have these Brexit comments, you're seeing more, more buying pressure come in than when the opposite way. So I think the pound actually might be the better pair to look at to go long. Where could it be a good place to go in? Where the pivot's not the worst. If we can look to get a hold there and then really targeting back towards uh, that high as well. Uh, would though of course mention having those, um, moving averages on as well. We're seeing, uh, quite interestingly over the last— and I'm gonna bring gold into the picture here, uh, make that larger time frame. You can see this, this year gold really has been under pressure, really going back to sort of April time. We could pretty much looks like— let me just remove the pivots, help clean that up— it looks like pretty much all the, the main currency pairs, isn't it? Aussie dollar double top from 2017 and '18, euro and the pound very similar, and then we come back down. Of course, gold at the moment very much moving off the, the strength or weakness of the dollar rather than sort of safe haven flows. So hence why this morning when we did see T-notes in yen, uh, sort of appreciate. And last night, gold not really doing the same. In fact, you can see did make a new low as that all sort of, uh, unwound into money going back into the dollar and out of gold, as we saw, um, the market, uh, strengthened there for the dollar. Elsewhere this morning, let me just bring up the, uh, calendar for the day. Give me one second. It's got find the tab, switch that over. You can see, um, going into the sort of the rest of the morning data-wise, it is pretty quiet. I'm just going to zoom in to make it easier for you guys to see. Obviously you've got your own copies anyway. Um, so I wouldn't be expecting data to sort of drive the morning. What has driven the price action? Well, over, overnight and last couple of weeks, I'll be looking out for any further news on this retaliation from China. What's it really going to mean? Key levels coming up now in equities around their pivots, highs of the day. If we break through here, the market's really saying, yeah, that's priced in, uh, move on, carry on, uh, business as usual, all-time highs by the end of the week kind of thing for S&P would be my view if we continue to push on. Uh, but of course that can change, and we did see that, uh, yesterday, the market pricing in that move really from the cash open. You know, a lot of that was, um, sort of factored in already. You have say, uh, afternoon, early sort of afternoon, we got some sort of lower tier data out of the US, the Redbook month, month, year on year, uh, also coming out. And then you've got its, its usual slot, the API, uh, at 9:30 for your oil numbers. We saw quite a, an interesting reaction to those figures last week. If I just bring that in, I know we'll run through this, uh, not just later today, but more in detail tomorrow. Um, circle that API reaction or rectangle it. Let's remove those lines. You can see quite a big reaction in API terms yesterday in the larger than expected draw, and that did continue but not to the extent of the, the API. And it was a very tricky one to trade around that R1 and 71, and we have actually come back down since. Oil on that longer term, you can see for me, uh, here these were sort of the main areas and levels that I was looking at. We're almost coming back down to test that lower sort of trend line or potential trend line. It only does have the two tests really, so I'll be interested to see what happens around that sort of 68 on the continuation. But the level or area that I'm most interested in would be to see if we can get a push higher. You know, I do think, and I've said, I believe we will continue to go higher at some point. But this is such a big, big sort of barrier where we had the lows from early July that we did then break through. And you can see each time we're coming back up to that sort of 71 area, we're met with quite a lot of resistance. So worth keeping an eye on those numbers from Tuesday. And of course then going into tomorrow as well, really that's the, that's the data for, for today, uh, in terms of what areas just to be aware of. So LIT, the perhaps the fundamentals drive the way and, and let, uh, you know, the, the technicals tell you what's going on, what the, what the market really is thinking. Speaker-wise, we've had, um, a couple, uh, ones to be aware of. Draghi this morning, but nothing really of, of note, uh, has come through. Maybe, um, that's still sort of to come. Uh, so the week data-wise for me is really going to kick off Wednesday onwards. I've got it written down here where it down yesterday. Wednesday is the focus data. You've got 9:30s for the UK coming in each morning from then on, and that would be where I'd be looking to sort of get perhaps these sort of shorter-term sort of moves from data releases. For now, uh, just sort of be, you know, listening out for the sport, for eyes on Twitter, which I'm sure Anthony Cheung will be very happy with me saying. You know, that's going to make the difference in times like this, uh, just sort of being aware of what people are saying. Definitely have the, the sort of scorecard. You can see, well, just as we've been speaking, the, the pound has found support at that pivot. The euro has sort of reversed a bit, gold as well. So you've just seen an unwind of this move, and it's getting fatigue, isn't it? It's— we need something new to get a continuation here. The dollar strengthened for so long of this all being priced in. And for what? Is it a surprise to anyone? Not necessarily. Let the, uh, you know, let the markets tell you what to do. Cash open again will be interesting as it really did kick on yesterday. I'll be keeping an eye on Apple as well. If we can get a recovery there, most likely equities are going to continue to push on. But if that gets dragged around by money and sort of flowing out of Amazon and whatnot and the tech sector in general, that might be the sort of the, the key or the cue, I should say, to continue the, the market, uh, sell-off that we saw yesterday. But, you know, we've already covered half of the sort of move from, uh, yesterday's high to low, so remains to be seen what, what happens there. Um, any questions, as usual, please, you know, do, do get them in the chat. I'll be on the desk for the majority of the day, and I'll post a couple of sort of more intraday charts in as well. Um, I would just be careful as well still at the DAX. You can see really since the briefing has started it hasn't moved too much. Uh, let me just bring that in just to wrap things up because, you know, we are coming into that contract rollover. I'd be just saying, well, where could be the opportunity here to almost get the reversal of the move? R2, not the worst area, a bit of support. That we found just above it. I feel if we can, you know, get a break below here, it might open up the door, and then you've got a decent sort of target area of those highs that we had from last week. One to bear in mind anyway. But if I don't chat to you guys, hope you all have a great trading day, and any questions, obviously, please do get them in the chat.