Oil Drops To Lowest Level Since 2003

OK, good morning. It is Wednesday the 18th of March. For now, still broadcasting from the office in London, but we will do our utmost to continue doing our sessions should we even need to do this from home. One thing to give you a heads up though, the plan is that we will be moving these regular morning briefings offline into a private room. So stay posted for more details on that, but we still will be publishing regularly content in a much more shorter form on our YouTube channel. So please do leave us some comments, any ideas on things that you'd like to see, do let us know. But before I begin, obviously every day it almost feels like this— the situation is becoming ever more real for— I'm sure you're the same— people you talk to, friends and family. So Obviously, I'll try to be as sensitive on the issue as I can, but it's still the biggest dominating thing. There's nothing else really to talk about but the overall growing threat of a global and potentially severe recession that we're facing now on the back of the reality of what this is going to mean economically, as it's going to most likely get worse before it gets better. And in terms of what's happening now, as you can see from the headlines to the side of me, is a number of coordinated, pretty unprecedented really since war times, amount of government spending that's going to have to take place in order to offset and try and get ahead of this impending downturn that's going to face every nation on the planet pretty much. And this was the main one coming out of the US last night. I'm sure you probably would have seen Uh, and just, yeah, the close on Wall Street, we were up over 1,000 points on the Dow. Uh, the Trump administration discussing a plan that basically amounts to about $1.2 trillion in spending, including direct payments to U.S. American consumers of $1,000 within the next 2 weeks that they were saying. However, I will put a caveat on that in a second. The administration have been discussing a total aid package of about $800 billion But latter discussions, then that number went up to that north of a trillion dollar level, although this isn't yet concrete, ironclad confirmed at this point. Uh, to give you an idea, Congress back in 2009, uh, this was in the immediate aftermath of the collapse of markets during the global financial crisis. To combat that, they did also, um, take this step of sending out these kind of stimulus checks but to give you historical precedence, from the time of signing the bill to actually getting those checks issued took 2 months. So this idea that they can do it in 2 weeks, I'd say, is incredibly challenging. But here then lies the problem, is that, you know, businesses most likely are going to have to take quite radical and immediate action, which means that people again, could face unemployment within a matter of days, weeks, which comparative to the speed of which these checks are going to go out, this is— then you could take this up a few notches. The same for businesses, although as we're going to discuss, the UK government is talking about government-backed loans. The, the problem here is the ability to get access and approval to those loans in time before these companies basically go out of business. And that's the worrying threat and the reason why markets most likely will continue to trade with this very, uh, fragile and risk-off kind of sentiment overall. I mean, at the moment what we're looking at here is a market still a little bit feeling the aftermath of that, that those big headlines coming up to us yesterday. Obviously that did fire up US equities, but as we've seen with other measures on the monetary side, the gains in terms of longevity particularly short-lived. US stock futures already limit down. However, on that point, I would just say that the limit down nature of US equities— I know this is— let me just make this bit bigger. US stocks have gone limit down every session for the last 5 sessions. I should say limit down, I should say they've they've gone limit level 1, whether up or down, every session. So it's becoming less and less kind of a real shock and awe type thing now. This is just a regular way of which the current market is, is performing at the moment. Um, another interesting statistic you might see me share on Twitter, and I'm not saying that this is going to happen today, but it is a quite an interesting observation that I saw. And it was the fact that the S&P 500 has started each day moving in the opposite direction from the previous day's late-day move every day for the last 2 weeks. And so what this data would basically suggest, that given we ramped up into the close on the fiscal package, we're going to sell off the following day. And we are seeing that already in the case of the futures. But then if we tank today, and particularly in the last half an hour, that means we rally sharply tomorrow is, is essentially what the data is telling you over every session of the last 2 weeks when we're looking at the S&P 500, uh, over those time frames. Um, elsewhere, just jumping back to this idea of stimulus, um, wrapping up the US, individual taxpayers may be getting a deadline extension on paying their tax up to $1 million. Corporations might get tax deferrals up to $10 million. Over in the UK, we had the Chancellor come out. So after issuing the budget, which had its own kind of coronavirus-related emergency package, that's been added to basically. And let me just run you through some of the details. Ministers are promising to help with mortgage payments, support for airlines, shops, the hospitality industry, £350 billion of government-backed loans, grants, and tax cuts for struggling companies, that does equate to about 15% of GDP. So prior to Trump coming out and kind of pledging this trillion-dollar package, the UK one actually was the biggest pretty much seen in the world as a proportionate of the country's GDP. Now the UK government has done pretty much more than anyone in terms of the amount of money that they're willing to spend to offset this downturn. So again, as I mentioned, it did talk about things like a 3-month mortgage payment holiday for borrowers, but that would be again contingent on affected, or those most affected by the virus. And again, this is where it's about how quickly can the government really convey the details and also unleash this promised cash, which is gonna be the real crucial point on how severe this economic recession could be. The fear being then that it's not quick enough. And that will amplify the fallout. And it's almost a vicious cycle where the more people then unable to do that, more businesses shut, the more unemployment there is, and then that spills out and starts to manifest itself. The Bank of England have said it will set up a lending facility for affected businesses. We've had overnight the Federal Reserve have done the same thing, so adding to their emergency slash to rates to zero, the $700 billion QE, The Fed have come out and talked about opening an emergency lending program for the primary dealers. Again, remember what I was talking about yesterday, trying to avert a financial crisis in the sense of all banks having a lack of liquidity, which would then put at risk a systemic risk to the system, which could make this almost a catastrophic event, not just an economic, um, one of significance. So here, primary dealer credit facilities, they'll offer overnight and term funding with with maturities of up to 90 days. That facility will run for at least 6 months. You know, and with all of this that I'm saying, what I would say is that, as you can see, the situation is evolving day by day, and governments are having to provide more information and more firepower. Same with central banks every day. I would expect that to continue. Now, question I had yesterday is well, when is the market going to hit this eventual bottom? And I would say the defining factor, what's moving all this, of course, is the virus. So really it's about now that the— you know, there's lots of different simulated kind of number modeling that they've done with the breakouts in various different geographic regions of COVID-19. And basically it's the trajectory of these cases as we've seen in, in places like Singapore, Hong Kong, Japan, South Korea, China, generally starting to level off. And I think really it's about this exponential growth of the disease, or the pathogen at the moment, which in the UK is growing rapidly. It's in that early phase of basically doubling every 24 hours. It's when that starts to shallow as a trajectory, I think, when markets might start to see a little bit of reassurance at least that we're getting towards some idea of close to the peak. The problem is at the moment we're right in the darkest part of the moment, which is the, the complete uncertainty, and that then feeds the, uh, the rationale of the consumer of that become fearful and stockpile, and that again makes the whole situation somewhat worse. So yeah, in terms of that, that telling point of when is it going to be the bottom. I think if you were going to watch that sort of thing, you'd need to look at then the rate of growth across these other major Western areas. And in the interim period, it's about then the confinement measures that are taken by governments. You saw yesterday France now, unless you actually have a letter of proof showing that you need to travel basically for more urgent reasons, let's say, I don't know, you're a doctor or or a nurse working at the hospital or something of that nature, then they have put 100,000 more police on the street. I'm not sure that was just in Paris, but then what that meant is that they can now fine you, they can question you, you need proof. So real kind of measures taken to the nth degree. And again, this in itself, I'm sure in the Western world, is going to throw up quite a lot of difficulties about how that is going to be controlled and implemented. So yeah, unfortunately not, not good times ahead, um, when I'm, when I'm discussing this. But the other thing that's happening in markets, just to quickly go back, I mean, from a Bank of England point of view, I do think the Bank of England are going to make an emergency announcement. I can't tell you when that's going to happen, but their next bank meeting is not until a week Thursday, and for me that's too long. The Bank of England have got to go again. So whether that happens today, tomorrow, in the coming days, I think that we are definitely going to see QE from the Bank of England, north of £100 billion most likely, buying gilts and corporate bonds. I think is a necessity now at this point. Whether or not they cut rates, if they do, I think you're probably looking at about 15 basis points to take rates to basically 0.1%, I think would probably be, uh, the most common view of what they could do. But as they say, I don't think it's a matter of if but when, and I think that they will act in the coming days. The other thing, of course, which has drawn some attention yesterday— and I'm going to get Sam on and he's going to have a talk as well about the kind of technical levels— but WTI crude. Well, let's just look at the long-term chart here. This is what oil looks like flirting its lowest levels in almost 17 years. Yeah, you've got to go back a long, long way. And in fact, I was just looking on the weekly chart here. If I switch over to my screen, this is the same on my, my trading terminal. And here you can see this is that key level which we were testing. This was the The big fallout that we had with the oversupply, the glut in the market, really came about here at the end of 2014, November. That was when OPEC took that decision to flood the market, to squeeze the shale industry. You have the China hard landing fears, and that was when we hit that $26. Well, we're right there at the moment, and actually a whisker below puts us back down at these levels not seen to this kind of period here in in basically the beginning of 2003. So once you start looking below these levels, uh, you start to see the next kind of areas, I guess, down at the March '02 lows. And then you start getting down to the, the psychological $20 level. And then below there, you've got the low that was seen literally after 9/11, um, in 2001. That would come at $16.79. Now A couple of banks have been out. Goldman's have cut their Brent forecast to $20 in Q2, so they are seeing a breach of these current key levels down another few dollars. Standard Chartered is going for below $20, and that would put us back down at the '01 lows. And I find it hard to really disagree with that view. I mean, it's such a mammoth economic challenge the globe global economy is going to face. I do feel quite bearish with oil. I guess it's just how far lower does it go. And I think once you start getting to $20 and around there, I don't think it can be discounted that we do get down to that real $16 type level over the coming weeks. It is not off the table, I'd say, at this point. Um, that is pretty much it from my point of view. I mean, I can show you the economic calendar, but As I said, it's getting more and more to the point of really this is less and less meaningful, i.e., things like building permits, housing starts, it's just all of zero consequence, quite frankly. I mean, from an oil infantry point of view, probably worth keeping an eye on given we're at pretty precarious levels here. Technically, all it needs is a match to light the, the kind of logs piling up, and then the flame the spark could cause the flames in the, in oil market that causes it to crash down quite violently. Could potentially happen. Um, so definitely we keep an eye out for that. But all in all, I would say the economic data now, it really doesn't matter. What we're trading now is just this kind of behavioral view, monitoring of governments, what can they do. Uh, further updates on that front is going to be key. Look out for any more emergency measures from central banks, i.e. The Bank of England, as I discussed, I think will move in the coming days. And then the escalation, I guess, in case if you're based in the UK, is that we start then at some point to implement more forcible measures like we've seen in France. Whether or not that happens, and I'm not here to speculate, but we shall see. And if it is going to happen that way, you're probably going to see some various other steps happen beforehand. Schools Nurseries are still open at this point in the UK, but, you know, just reading and watching the news last night, I think political pressure is going to get so much that I'm not sure how much longer they can hold that off. And certainly I don't think they can hold that off up, you know, buy enough time up to Easter. So again, that's probably forthcoming as well in the near future. All right, gonna hand you over to Sam. Back by popular demand. So let's get him on and hear what he's got to say. But take care, guys. All the best.

Hey guys, couldn't get rid of me, uh, that easy. I don't know which market to start on. You've got pound about to hit 120, you've got S&P limit down, you've got oil near one of the biggest levels, uh, of the last few years. Let's start with oil. Um, look at— it's insane, these moves. And I mean, where do we go if we, if we close the day below there? I mean, what's stopping 20? What's stopping 20? Tim, it'd be interesting to see what you think, uh, about oil here. I know you've been bearish for quite some time. And, you know, back, back last Monday, nice little bounce from 30. We then tried to get above that range, but yeah, that weren't happening. And then when Trump did the, the travel ban overnight, well, it never looked back, did it? So keep an eye on these levels, of course. Big, big area, $26 as well. Let's have a quick look with the pivots on. Not that, you know, they're going to be the be-all and end-all today, but you can see if for whatever reason we could drift back up towards $28, you've got to like that as the, the look of these sort of lows previously as an area to find some resistance. $27.37, similar kind of thing with the original low that we had last Monday. So I'll be keeping a watch on that. Uh, 48, 28, 23. The hourly closed below this, this historical level, below the, the 26s, low 26s. I think that could, could lead to a further push down. And as we bring in that 15-minute, you know, these are the, the type of areas though, if we don't close below, you can get a strong rally higher. So yes, have the bias that we can, you know, go one way or the other, but just remember, you know, prices is king here, and what will happen will happen eventually. But it doesn't have to go down if that's your bias away. It could of course have a little rally if we fail to close below, for example. So yeah, big level, uh, potentially a bigger level in markets for me is, is that 120 in the pound. Let's just bring this on without those pivots on and bring this into picture. You can see we, we spiked through it, didn't we, back in, in September very, very quickly. We, we broke down, then spiked back up, and then, and rallied up to 135. Not saying that's going to happen now, but you can see the importance of that level as well. This is going back here to— let me just hover over that— yeah, that the post-Brexit low. Can't quite get the month on it for, for whatever reason, but it's around, uh, I think it was sort of October time. Uh, and then if we have a look here on the weekly, just to, to put some into some perspective of, you know, here where, you know, the futures here you know, with this going only back to 2001, but you can just see how low that is. You know, be worth bringing on the, the spot market going back even further. But here you can just imagine, if we can close the day below here, then, you know, this market potentially can, can fly. And, you know, I've got certain people in my ear telling me, you know, look at this trend line going from here down to there, we're going to get 110, we're going to get 116. Well, you know what, if we close below 120, you know, what's going to stop it? What is going to stop it? The dollar is strong at the moment. Keep an eye on 120. Remember what happened last time. Just because we briefly go below doesn't mean it's gonna absolutely accelerate down and never come back. So just be prudent, be careful. Euro at a big level as well, the 110. Put this on the daily chart, you can see the importance of this whole area. If we just draw up 110 historically, not just from yesterday, but going back here to November time, October time last, last year, below here when— yeah, you've got to say dollar is king and we're going to look to test those lows again, which is insane. Unfortunately, my trade, the, um, the fib 0.382, 115 handle high from the, the 25th of June— yeah, I mean, that was out last Friday. Uh, what, uh, what hindsight can tell you, eh? I mean, that would have been such a good trade to hold. But this is a key level. You're coming to a key level in the pound and the euro, both against the dollar here. One market that is quite interesting combining those two is euro and the pound. It's been vertical at the moment. We are coming to quite an interesting level here. This is more, you know, I want to see how we close the days and weeks up at these points going back to September last year. And I mean, if this breaks through, then you're going to get that high from the 12th of August last year, which is pretty much a double top, you could say, from August 2017. Looking more intraday, if it doesn't quite get up there, it looks better on the spot. But you've got quite a key level of support here that I'll be looking at from yesterday's lows, today's lows, and a bit of half-decent price action on the 16th. So we can get below there, um, you know, I don't mind the idea that we can potentially drift lower, but then, you know, close the day above those levels, we push on and And those August 17 and 19 levels, well, they could easily come through as well. So keeping an eye on that, I think, is worthwhile. The Aussie dollar, uh, has been— well, that's been relentless to the downside, and that is on the low right now, drifting that chart back as far as it can go on the daily. You can see we're nowhere to be seen. Put it onto the weekly, once that loads up, you can see now if I drag that there, we're at levels— well, we just hit a level which was the post financial crisis low there in the Aussie dollar futures. So what happens below here is, you know, it could really— again, look for the daily close, but it could accelerate down, and then you suddenly look into— what's this here— 2003 levels. Same for the Kiwi, under, you know, pressure in these markets not too long ago. We're finding support where you think, okay, we've got a bit of a rally here, but again, look, under massive pressure, the Kiwi. So dollar is strong at the moment. Let me just see Dixie. Exactly, that is trading on the Dixie. Yeah, broke $100, didn't it, not long ago, which is a key point. Did hit a bit of resistance from, from yesterday evening, but yeah, above $100 is, is very strong. Let's have a look over at equities. Of course, limit down today. It's, uh, you know, just looking here at the Dow, we haven't had 2 days positive in a row since the 28th of Feb, and then we don't have 3 I mean, going back here to the 12th of Feb. So yeah, I mean, where we open today, we'll see what obviously happens in, in the meantime between 1:30. But, um, yeah, it's, it's not a pretty picture for equities at the moment, and, and trading them at the moment is very tricky as well. You're constantly having these breaks in the market, you're having swings of, you know, 5% up and down each day minimum, and the spreads are pretty big. So you know, don't feel like you have to be drawn towards this market because it's the most talked about. Of course, currencies are now moving how equities were, so there's obviously plenty of opportunity for that as well. It looks like we could well open up, uh, below 20,000 in the Dow Jones, which would be pretty insane to think about that, just given how, um, how far— how recently we were at at all-time highs. Just from a longer-term point of view, you know, this is when, you know, you've got to start thinking about, well, hang on, is this actually an area for a longer term to, to get in? And, you know, you're— you'd be unwise, unwise to, um, I don't want that— unwise to go full in, full size right now. But that we are— I mean, if we do it to where we're trading down at those lows, you've got a 30% discount at the moment. Um, for me, you know, this, uh, this area here, uh, was a— is a point where I'll be looking to, to get in longer term as a sort of a fading in approach, looking to, to hold some of these positions for, you know, a number of years. And then this is one of those points where I've got marked up as this is a, you know, we could absolutely smash straight through, fine, but it doesn't bother me. You know, this is a longer term play to eventually you know, when this market does start to recover, you're getting up towards those highs again. It's a, it's a 46% move, you know, you're not going to complain too much about that. Where do I think we can go to? Well, look, that's anyone's guess, to be completely honest. I think we have to take out these December 2018 lows. That's very much the, the talk on the street. We need to do that, and then it's, you know, reassess from then on. Um, it would be heartbreaking for, for Trump, wouldn't it, if we got down to the election low at, uh, 2028. It's not out the question, to be completely honest. But the other level that I've got marked up is the 50%, uh, push lower. Let me just get that currency. So if we were in the S&P to do a 50% move, um, which would be obviously quite insane— so yeah, it's just a bit above there, you know. If we were to get down to those 2016 uh, lows, then, you know, that would be the main part of my longer-term point to get in. Don't think we necessarily get there though. However, have a quick look over at gold. It's, you know, it's a market where we're having wild pushes either way as well, just like pretty much every single product. It's one where you've got to be— it's a condition where you've got to, um, obviously identify your levels, maybe wait for your, your signal, your reg to get into that trade and, and take it on, but be quick to get out because these markets can turn on 6 pence. And you can see here, that's what it's been doing for the last couple of sessions. We have got quite a good line in the sand here, 15.19.4, the highs from Monday evening, Tuesday morning. And then we've broken through, found resistance there as well. So keep a watch on that. And then just having a look, you know, here, 14.87.1, this is the same kind of thing that I'd be looking at. Decent area of support, good price action through there. If we come down, you know, why can't we see something similar to what we saw at, um, at those levels to the upside. And this is how I would look at every product and, you know, identify your levels. And don't feel— don't get that FOMO, feel like you need to jump in straight away, because there's going to be opportunities throughout the day as well. Maybe worth having a bit of a trend line on there. Comes in probably— could potentially come in around the same sort of time there for gold, which incredibly as well is, you know, I mean, so high at 1,700 to where it is now. I mean, that's, uh, percentage-wise to where we're trading, you know, 12% move. Those lows we hit in, you know, didn't quite get taken out here on the futures November levels. I think we could, uh, in time get another test of those as well, especially if the dollar is going to remain this strong. As usual, guys, any questions, please do let me know. Massive levels in oil, pound, euro, and of course equities as well. DAX just having a bit of recovery, so keep an eye on US equities if they were to get a potential boost from European stocks. But at the moment doesn't seem to be the way. Hope you all have a good trading day, and, and any questions, guys, please do let us know.