Nasdaq Back To ATH But Is This The Top?

Okay, very good morning everyone. It's Tuesday the 4th of August. Hope you're doing well. Just quickly to mention, on Friday we're going to be covering, myself and the team, non-farm payrolls live. All you need to do is register following the link in the description of this video if you're watching on YouTube, and we look forward to seeing you online then. But let's get stuck into the briefing. What have we got on the agenda for the session ahead? Starting off, I guess, chronological with the close on Wall Street, which was firm and saw the NASDAQ print fresh all-time highs again. Apple set an all-time high. Microsoft was up sharply, uh, and gained as it tried to salvage a deal for the US operations of TikTok. And so we're going to bring up a couple of those charts from an equity perspective, but generally that handed on the baton to Asia which ran with it and generally positive developments that were seen there. And so we've kind of come full circle in a way. Um, the DAX up a touch, but US index futures pretty flat overall. T-notes up marginally, gold up a touch, around $4 gain, and the currency market's pretty quiet. The Dixie is pretty flat at the moment, and that's largely reflected in major pairs. So that's the overall sentiment of what's going on. But again, let's just have a quick look at these charts. And let's discuss a couple of different things. And for one, just want to talk about the data from yesterday. Um, we had ISM manufacturing in the US expanded in July at the fastest pace since March of 2019. And this came, of course, after what we saw from Eurozone, where manufacturing was also picking up. This is looking at a variety of different countries in mainland Europe— Italy, Spain, Germany, France, but also as well in the UK. And you can see this distinct V-shape that we've had. One thing to be aware of though, this is a diffusion index, and so literally it's a case of asking these purchasing managers, do they feel worse, the same, or better? And so it is subject to quite big changes in terms of economic or period of economic turbulence, because people's minds can change, particularly in the environment where we're dealing with a a global health pandemic, things can alter very quickly. And so definitely a positive. Um, you know, some of the gains that were seen as well in the tech stocks were really solid. And stocks also got a lift after President Trump was talking about he may take executive action to impose a moratorium on evictions and enact a payroll tax holiday, with talks on that new virus relief plan making slow progress in Congress at the moment following that expiration of that $600 enhanced benefit payment at the end of last week. House Pelosi, or House Speaker Pelosi I should say, said she hopes a deal could be made this week, although she acknowledged it will not probably occur until next week is the current status of those discussions at the moment. But again, let's just have a look at some of the charts here, and particularly the NASDAQ. I did mention we're right up there again at these all-time highs. And I guess got to look on a daily continuation to really see things in a bit of a better perspective. And again, this is looking at the year-to-date picture, so anything really, uh, right-hand side of this vertical line would be the period of 2020. So you can see continues to just power on well in excess of the initial levels we were trading pre the pandemic. And we've got up to a really quite key area in the NASDAQ and we haven't really breached it yet, albeit it did trade above it last night. And that is this kind of triple top now we're forming from July, July 13th, July 21st, and then last night. And you can see a couple of technical points where this market has really held up quite nicely. For one, this blue line is the 21 DMA. Definitely was a strong technical signal going back in April, May and has been relatively strong as well throughout recent months. Then you had that period last week where seemingly attention was shifting a little bit from the US COVID developments as numbers and rates there still are moving north but at a slower pace than what we had been seeing. Whereas in mainland Europe, particularly in areas of Spain, also France, numbers have been picking up and people getting a little bit apprehensive there on the global basis last week. And that saw us test the bottom end of this trend line going back to the price activity since really the recovery started to begin in the back end of March into early April. And then we had that mega-cap tech earnings day, you remember, Thursday night, last night. We had the Amazon, Apple, Facebook show, and they all traded sharply higher, you know, 5-6% type gains. That really fired things back up. And then here we are right back at that point again. So going for further forward into today's session, definitely it's a key level to watch. Do we now start to break out and start to push on to renewed highs? One thing I would say, and one chart I just want to quickly bring into shot to discuss, which I thought was particularly interesting— now I must give this a bit of a caveat, um, the person is quoting The Lion's Share. I think there's a guy called Dana Lyons. I can't say I've heard of him before. I've not really had too much time to do my, my checks, but the person reporting this comes from a fairly verified source, so I'm going to run with it because I think the conversation is quite interesting. And it's looking at the market breadth. So one thing that some people do when we see an equity market moving higher is what is the market breadth of the advance of the underlying stocks within that index. Now, one thing of course that's been very interesting is that, you know, we've probably seen a lot of charts of the S&P, and given these massive outperformance of these big mega-cap tech names, that they, they equate to around a fifth or so of the entire S&P 500. In the case of the NASDAQ, it's obviously even more prominent given its technology focus as an index. But one of the things we had yesterday was the NASDAQ, um, was up, but only, um, well, from a statistical point of view, the NASDAQ closing up more than 1.6% with less than 40% of NASDAQ advancing issues. And so what we're seeing here then is kind of a lack of follow-through in all companies moving higher. And really it's these mega caps that are just dragging the index up. Which isn't particularly a healthy sign, is what history would tell us. You can see then these previous dots would be reflective of these occasions when that's happened, i.e., the NASDAQ's been up in excess of 1.6, but on the back of less than 40% of those underlying stocks moving higher. And you can see we had a hiatus here. We peaked a number of times in that price activity during the, the kind of dot-com era Um, again, we got to that point on those two prior occasions as well in the early noughties when this happened, and it was generally followed by periods of then a bit of a negative turn to the downside. So now that we're up at these levels, it's obviously looking quite elevated at the moment in terms of the NASDAQ. It'd be interesting to see whether there's appetite now to push it on beyond this point. One thing is, from an S&P point of view, there's definitely a little bit more room to run because that's not quite yet at its all-time high. We have broken though above quite a crucial level here more recently, and that was that peak before the renewed Chinese tensions kind of started to kick off about 2 weeks ago with the consulate situation, if you remember. That does now form a really nice base though to some of this recent price activity, and that's that kind of cluster of area of support through really the majority of mid to late July, but we've just managed to move above that now. Targeting the $3,300 handle is going to be the next big level. The, the gap down that we had that occurred back on the 24th of Feb would be my next level to watch. Beyond that, the $3,300 levels, $3,312, and then really you've got to start, got to start looking up to probably the initial high on the 6th of Feb, which was also a support area on the 18th at 57s. And then we got a target back up to the all-time highs if we were looking at that pursuit, if you were of a bullish disposition thinking we're going to continue to just grind it out. So if that does occur, then you would think just generally the movement in sympathy, if there's enough underlying fundamental forces to lift the S&P in that fashion, well, that should really translate into the NASDAQ then wanting to break above some of those key areas we were just discussing. And perhaps the NASDAQ is a trigger point. And if that does start to break out, we start to push up— this is uncharted territory now— we get to 11,500 would be, uh, the nearest and clearest target. Well, that could help that S&P trade, uh, if that were to materialize at the moment. Okay, the other things we've had, um, overnight, if anything, the Aussie has moved a little higher, um, I guess taking heed perhaps a little bit from the idea that although the Reserve Bank of Australia, the RBA, kept its interest rate and its yield target unchanged overnight. That was no surprise at all. They didn't announce they'll end the 3-month hiatus in its bond buying, so looking to prop up confidence essentially, given the fact that at the moment they're really struggling. Now, they've had such a bad run of things at the moment, from the bushfires to the ongoing trade spat with China on on the trade front, uh, to now the COVID situation, you know, it really has been a tough time for the Australian economy. Retail sales did come out overnight, adjusted for inflation slipped 3.4%, that's negative in the month of June, albeit not too far from expectations of -3.2%. But of course the RBA, uh, it comes at a time where they're trying to navigate basically the hit from the effective isolation of the state of Victoria, which accounts for almost a quarter of all of Australia's GDP, just given that origination of the outbreak that we've had in the capital city of Melbourne. So yeah, there's more kind of conviction, I guess, behind the fact that there's a kind of realistic idea that in the future, the most likelihood is they're going to have to do some degree of further stimulus. Again, recommencing bond buying is the, is the first thing. They have said that, you know, COVID aside, then they actually see the recovery was underway. But the problem is COVID is not aside, it is a clear and present danger for their economy at the moment in one of the most key populous and key areas of productivity within their economy. So if anything, as I said, the Aussie actually has moved grind it up a little bit in the overnight session. I guess it's kind of— it's a similar vein to what we have been seeing in the euro a few weeks ago, where the more they offer, the more it assures the economic recovery, and then we move higher again. Okay, other things, a couple of earnings reports that we've had. We had BP, so one of the FTSE giants, come out, reported a £6.7 billion second quarter loss after major write-downs. They've also cut their dividend in half, actually, um, 5.25 cents per share compared to 10.5 cents per share in the first 3 months of the year. Just though, gonna quickly jump back to the charts because I can see it blinking in the corner of my eye. Just had a bit of a breakout here in the equity index futures. The NASDAQ here just getting a real head of steam now and just looking to continue on that pop through following that just general positivity, the higher close on Wall Street, overnight performance in Asia Pacific region. Not a great deal of really European, UK-related news this morning, and the NASDAQ really just getting fired up and, uh, just breaking out to the upside now. So a bit of a further extension there on some of those levels we were just discussing. Let me just remove some of these. Then S&P then likewise we're just breaking above, uh, the range high that was constricting some of the price action from yesterday afternoon. And that also does mean we get above now that Asia-Pacific high as well that we had in the overnight session. So yeah, continuation of some equity strength for the time being. Um, what does that look like then for the commodity market? Well, gold is still kind of knocking on that door of $2,000. Hasn't really had a firm break of it yet, despite the brief flirts with it at the end of last week and in the breakout that we had at the recommencement of trade in the overnight session on Sunday night. And we're in a period of consolidation really at the moment, as you can see here from some of the price action that we saw materializing from late yesterday in the US hours. So that's really the areas to watch Uh, so defined by 1988 at the low and 1995 at the high. Any breakout above there, obviously the $2,000, $35 above the top end of that range. And then any move to the downside, I'd probably be looking out for any response to around this type of level, uh, an area of support around 1982, which if I just put my lips would coincide with around that trend line going back to some of the price activity from the 28th and the retest on the 30th and yesterday. So these would be, I guess, the rectangle defining the range to watch for now if you're trading gold, and then the ellipses to the upper and lower key areas to keep an eye on. The break of that lower area in the trend line, then you've got a nice area as well there today forming with the S1 on the daily pivots, which coincides with yesterday's low. And also the high— or excuse me, the low that was seen on Friday. And that also encapsulates a lot of that price being respected as a point of resistance on the 28th and 29th of last week. So quite key areas there in gold from a technical perspective that I would be keeping a very close eye on. Um, quick look at the calendar. What have we got for today? Uh, for the morning it's, it's pretty quiet. There's not actually a great deal coming out. For this afternoon, there's no real major 1:30s from the US either. We do get ISM New York Index, and you've got US factory orders coming out with durable goods revisions. That'll be both at 3 PM London, so 9 in Chicago. And then fixed income supply, mainly out of the UK. And then from an earnings perspective, as I've said before, on Monday there's not a great deal of big index-moving US corporate earnings to be aware of, but Disney is reporting today, a fairly sizable name. Emerson Electric, another one as well. And that's about it really. I'm not going to take more of your time than is necessary. And so any questions at all, feel free to leave a comment. As I said, remember to register for that payrolls live session we're going to do on Friday. It's going to be capped at 500, and so first come, first served basis for that. But yeah, that's it. Wish you guys a good day ahead. Take care.