Oil Rallies Most On Record After Trump Comments

Okay, very good morning guys, it's Anthony here. It's the 20th of March and as you can see I'm actually sat at home, so hopefully we can continue to broadcast as per normal with the briefings. We did mention the other day that we were going to make the briefings private, but we've had a pretty tremendous response actually from our subscribers. So for now, we're going to continue to keep these open for free on our YouTube channel. The only thing that I can ask of you, please, is that— I know we have quite a loyal kind of following, but if you could share our kind of link into your communities, try and build this up as much as possible with massively appreciate that. Obviously not just myself, but, but Sam, who you see on the mic with me a lot as well, as well as everyone here at Amplify Trading. 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So hopefully, um, it doesn't provide an obstacle for people who are still wanting to obviously learn and still wanting to trade in that respect. So anyhow, let's get, let's get back to, to markets for a second and have a look at a few different things. While I'm kind of still getting used to doing this from home. I'll try and make it as smooth as possible. But obviously, yeah, this is a massive comment that came out yesterday. I'm sure you saw oil making its biggest spike on the upside actually on record. So even dwarfing that of the big spike we saw in September when that Saudi Aramco infrastructure got attacked at the time by those reported drones from Iran. Uh, but we'll go into that in a little bit more detail shortly. Let's just have a quick look at the charts and, and how things are shaping up this morning. And what you can see is a little bit of a broader recovery across the board, uh, so a little bit of a softer dollar. Both major currency pairs in the top left— so my setup here is exactly the same as it, as it always is, uh, EURUSD and Cable in the top left and center, uh, so they're both on the ascent this morning. Cable trying to make a continuation of the really strong move, of course, that we saw from the other days. And let me just shift this over to a daily continuation. Obviously, for Cable, it had an almighty fall through the period of really since the 10th of March, but really saw a quick descent as we went through the technically really important 120 level, that of course marking that double bottom from the post-referendum. That was also that low point we had here when Boris came in and he was talking about hard Brexit and so on. And so that did put us down in cable to these, you know, really important long-standing levels. You can see here on my chart, just to put it in context, this goes back to the year 2000. And we haven't been this low since 1985, of course. So a lot of this, of course, just pricing in the economic implications of what's going to happen with the impact of the coronavirus and the shutdown that's going to take place throughout the country. I think I've just seen the list this morning of all the key workers, and it's not that people can't go to work. I mean, actually, if you think about it, it's not just doctors and nurses, but you need to train drivers to keep the infrastructure for the transport to keep going. You need the people at supermarkets to keep working. You need the people in financial services to continue providing the loans that are needed for small businesses. So there is still a lot of people at work, but those more kind of high street retail shops are the ones I guess probably going to be most impacted, and restaurants, things like that. And again, although the government not being completely definitive of what they're saying, but generally the people not meeting in mass gatherings and so on and so forth. So the pound, obviously the Bank of England taking emergency action, restarting QE, rates back down to 0.1%. I don't think any of that came as a surprise. It was just a matter of when, not so much if. So I guess, given the severity of the fall that we saw just the other day, I don't think really this is too much of a surprise. A little bit of a meaningful bounce, I guess, the thing you'd be looking for is that as we start to track back higher in cable, it's really when we get back up to that 120 now, which is going to be quite interesting. You know, do we get that, that kind of move where we start to see, um, I guess let me just see if I can put an arrow here. Yeah, do we, do we break higher like that, or do we come up for the test and then we start to move back down again? I guess that's going to be key, and that definitely potentially could be within sight in today's session. As far as the news is concerned on the UK front, if I just transition here to something that's come out this morning, which is, uh, obviously this guy you're probably getting more familiar with, Rishi Sunak, the UK Chancellor. So after the UK government proposed basically a stimulus coronavirus kind of package of about £350 billion just a few days ago, one of the main things here is not so much about the individual kind of consumer, the way to really help them the most is to make sure and safeguard their jobs. This is what's at real risk because if companies cannot open for business, and it's not just about one person, they lay off a number of staff, that kind of manifests into then an entire supply chain that might service that company. And therefore one company going under can have massive implications. And then just given the inherent nature of a lot of people living on quite a fine balance between managing the various outgoings that they have you know, it could be hugely detrimental, uh, to the— to the— to not just individuals but to the whole UK economy. So what they're talking about here, the Chancellor is set to announce an employment and wage subsidy package to try to protect millions of jobs. Apparently talks went into middle of the night with various different business groups and trade unions. One of the things here I read, one proposal under discussion is for the UK to follow the lead of countries such as Denmark where the government has promised to cover 75% of salaries at private companies for 3 months if they promise not to let staff go. So I do think that this is, you know, as much as I do anticipate the UK government will literally, as per the central bank, do whatever it takes. I mean, this is one of the key things that needs to happen in my mind if we are going to really mitigate what could be an absolute economic disaster of sorts. And so look out for more details on that. I think that's going to be particularly key. And perhaps in the short term, although the pound's still going to really struggle, that might add some short-term relief, given that that's a real concern at this present point in time. Let's just have a quick run through then of some other stories before— and we'll kind of wrap in a few charts. There's obviously no Sam at the moment, but what I have asked Sam to do is if you go on his Twitter account, he's he's gonna tweet out a lot of technical charts of things that he's looking at every morning. So yeah, oil rebounded yesterday, and in fact the biggest rebound as Trump hinted at a roll on a price war. Now one of the things we want to have a look at here is this is a look at WTI crude futures as a percentage change going all the way back to the beginning of the early '90s. And you can see here the moves that we have are just quite, quite monumental in terms of looking back in history, both on the down and the upside. Obviously yesterday moving north of well over 20% in one day. And, uh, well, why, why did this happen, I guess, is the first question. I mean, the actual price rose 24%, is the most since trading began in 1983. And it was on the back of this, um, Trump was making a lot of comments. He basically said they, they plan to aid struggling American shale drillers involving buying as much as $3 billion worth of oil from domestic producers who employ 5,000 people or less. Remember, as oil came crashing down and it got around to $20 just the other day, as it went through $40 earlier, about a week or so ago, that was when people were coming particularly interested in monitoring the kind of stressed positions of a lot of these indebted independent, specifically kind of domestic oil and gas producers, given the nature of the fact that their available free cash flow is minimal. And so when then they go beneath their kind of breakeven cost price, then it becomes particularly difficult for them to continue to operate. That then puts at risk then defaults and bankruptcies and inevitably unemployment rates. And so, you know, with the US government looking to specifically target these much smaller firms, well, of course, that resulted in some of these. If I go on here on the heat map of the S&P 500 from yesterday, you can see here the independent oil and gas firms, you know, you've got gains ranging from really 2% on the upside all the way up to 30% for some of the names. And you can kind of look at the whole cross-section there, but those smaller firms really benefiting from some of these comments from yesterday. The other thing, if he was talking about here, this is a chart looking at the kind of, I guess, US rescue plan. Because let's not forget, you know, although perhaps beneficial in a consumer sense with oil trading down at $20, you know, even it's not just a Saudi-Russia issue in terms of how low this price is for for the objective of kind of balancing their books. It's also, as we've said, very difficult for America. America can't be there just forever supporting financially these firms. Ultimately, they need the price to go back higher again so that they don't need to be so supportive in such a monetary way. So here what we're looking at is two lines, the black one being the price of WTI crude oil over the last few years. And the orange line is the SPR, so this is the Strategic Petroleum Reserve. So at any one point in time, America basically has a whole stockpile of oil. So if they're— you know, the kind of history would be in times of war you have this kind of warehousing or storage of oil that you can draw upon if there's any disruption to supply and the kind of maritime movement of oil. More so now, it's used when there might have been devastating natural disasters, things like hurricanes, for example, is when they might release part of the strategic reserve. Sometimes when the price is particularly high, maybe they want to artificially in a short term flood the market in order to bump the price lower. Here it's quite the opposite, and what we're talking about here is the Energy Department in America basically yesterday said they will initially purchase 30 million barrels of sweet and sour crude for delivery in May and June, with plans to buy as much as 77 million barrels in total over time. Steven Mnuchin, the Treasury Secretary, went even further. He said— I've got his comment here— the greater action to aid American producers on Thursday, saying he will recommend to President Trump to ask Congress for as much as $20 billion to keep the Strategic Petroleum Reserve full for a decade. So $20 billion, so that's a, you know, huge amount of oil, and consequently the reason why we have this 24% appreciation in the price of oil yesterday. So yeah, I mean, when we look at oil, let me just transition back and let's just have a quick look at that chart and where we're at at the moment. WTI crude is still rallying this morning, and definitely that's helping a little bit as well with the equity bounce, which we'll, we'll also have a look at the chart in a moment. You can see here the volatility around when some of this news was coming out. So we're just coming up to the 28 handle at the moment, that high on that initial spike yesterday came in at 28.28. You got the R1 sitting just above. So in terms of the near-term price action, uh, just having a look here, I mean, this is a 30-minute candlestick. That's a pretty significant technical level, quite clear to see here. You got that spike high, you've also got these lows, a little bit of respect for the price action here going back on to the overnight session on the 9th. And you can see their initial test, break, fall back onto that level before the initial push back down again. So as we come higher, I'd probably be keeping a bit of an eye on that level going forward. That doesn't detract from the point though that generally speaking, yes, this is pretty unprecedented moves that the US are taking, but what I would say is that we still remain quite bearish in terms of the prospects for oil. So even if we did come back up, I think fundamentally, just given with the pressures that the global economy is going under at the moment. It's hard to see really oil pushing, at least for the moment, back up to that, you know, pre-gap lower that we had, which was kind of north of the $40 handle. I think a lot's got to happen before we get to that point. The $30 price level as well, not just psychological. You can see just around that area, sort of from here to here, there's a couple of— there's almost like a zone, if I was to put like a rectangle here, of price area, which I think would be quite a big area or obstacle of resistance, uh, that might well constrict some of the upside if we did get through this level around 28, 28 in the futures today. So that's the, the kind of oil situation. And obviously from an equity point of view, that has helped a little bit just given that, that kind of industry and sector breakdown we were just observing on the S&P 500. So here is the S&P 500, and I've just marked up quickly before we started a couple of levels here. And you can see that we've broken above, uh, two key areas here, which was the high print we had from yesterday afternoon and then the day before, the initial high. So that has helped just here the S&P accelerate a little bit here to the upside. A pretty forceful move. I mean, these aren't small. This is quite kind of the incredible thing about the, um, the, the nature of the market that we're trading at the moment. You know, these, these percentage changes are very large. I mean, overnight, obviously, we had a positive close on Wall Street, albeit fairly moderate. But overnight in the Asia-Pacific session, uh, we had gains in the South Korean equity market of over 7%. Shares in Hong Kong climbed over 4%. So pretty decent lead to hand over the baton to, to UK and Europe this morning, with the oil price still moving up. That's what's leading to a little bit of this kind of renewed risk-on for the, for the time being. Looking at the S&P on a slightly longer time frame, you can see as well there was a trend line we were just keeping an eye on from kind of the early part of March, really. You can see the multiple tests that we had a few times early on, again kind of mid-month, again pretty much to the tick on the 16th, and also in yesterday's session, a breakthrough that, and now a breakthrough that top end of the R1 and the high from 2 days ago has just led to a bit of a further acceleration up and probably now going to target up around that 2,500 on any push on the upside. Anything above that, you've got those highs that we're seeing then that would come in on the 17th, and that would be just ahead of the R2. 2,542.75 would be levels to, to keep an eye on there. But equities, pretty decent start so far. How long that can last, I guess, or all yet to be, to be seen. Let's go out then, a couple of other news stories just to finish things off, and a few things to mention as well. So away from Trump, one of the other things here is that, you know, in order to ascertain where does oil prices go from here, you know, Trump has done his thing now. He's been very vocal. He's talked about the fact that he wants to get involved in the standoff between Saudi Saudi and Russia. That's fueled up things, the purchasing, uh, of direct oil as well as potentially topping up to maximize the SPR for 20 years. All of this has been very bullish. However, the crux of the matter is yet unresolved, and that is the situation between Russia and Saudi Arabia. And what has Putin said? Well, Putin has said he will not submit to what is seen as Saudi oil price blackmail. Now, problem you have here, there's a lot of, there's a lot of ego on the table. Now, you know, Putin's a person who's been in power for a long time, best part of what, two decades or so, and he has this kind of, as Bloomberg alluding to, this strongman image. Very difficult for him, I think, at this point to, to blink really and show his hand. The state budget in Russia uh, which is based on oil prices of just above $40 a barrel, will be in deficit this year. So that's forcing the government of Russia to tap its kind of sovereign wealth fund in that sense to keep the economy going. But again, their state budget is based on the price of oil, which is half that of which would be the equivalent of what Saudi need given their quest to diversify their, uh, their economy, uh, given the the kind of lack of monopoly that they've got on global oil prices nowadays. So here then, if Russia aren't biting and we're having this kind of standoff between Saudi Arabia and Russia is ongoing, yes, we've had this relief about what the US are doing and what Trump has said and committed to. However, without Russia and Saudi really fixing this situation, and if they continue to compete and Saudi deliver on their promise and undercut the market and really ramp up supply, well then this short— this is by definition, I think, a short-term relief and we go back down again. So yeah, whether or not Trump can get involved into the geopolitics and start to really put some pressure on Saudi and maybe open the dialogue with Putin, you know, that's probably another thing to be aware of. But you know, I, I do think that the overall catalyst here remains unresolved, and so any push up. As we just looked at some areas there, some topside kind of decent points of resistance in the crude chart, I think they'll hold for the moment until we get more out of that. Quick update on the coronavirus situation. Obviously you've probably seen the news— deaths in Italy now outweigh that within mainland China. That irrespective of the fact that total confirmed cases are pretty much half of that of what is actually being reported in China thus far. The chart, of course, which we've been looking at a number of times is this one, which is the just exponential growth of the number of reported cases outside of mainland China, where there in the Far East, as well as in countries like Japan, Singapore, and Hong Kong, pretty similar kind of flatlining in the curve. If anything, has seen periods of cases declining. Quite the opposite still still, uh, in, in mainland Europe and in the Western world, in terms of the United States of America, for example. Cases there now just short of 15,000, um, and obviously still on the monitor for how this develops going forward. Um, what have China said? Well, they have talked about further room for further reserve requirement ratio cuts. I think that's totally as to be expected. This is just their commitment, other than the government, but from the PBOC in order to do everything that's necessary to make sure that there's ample amount of cash and liquidity for commercial banks to operate freely. And then we've had ECB's Christine Lagarde. She's come out and she's basically talked about the fact that they're fully prepared to increase the size of their asset purchase program. They're willing to adjust the composition by as much as necessary, basically for as long as needed. She actually said that we would expect explore all options and all contingencies to support the economy through this shock. So again, very reminiscent from back in the sovereign crisis, that kind of infamous phrase of 'we'll do whatever it takes.' I mean, literally, they're not only doing that by adding, say, €750 billion in the top-up of their existing asset purchase program that we heard the other day. They said they'll consider raising self-imposed limits on asset holdings and and yeah, literally doing whatever it takes. And so this will help kind of stabilize the situation if only it can then really get into the psyche of the investor that, you know, there's— if, if we believe then that they will go to no end in order to mitigate this potential global event that we're facing, well then remember we're trading future expectations. And if we can believe that then, you know, we can't fail, then at some point there's going to be a bottom. Now, on that point, um, usually theoretically what we look at in markets— and this is kind of what we would have done in the financial crisis back in 2000, I guess post-financial crisis, '09, '10, '11— we would look at, you know, where— what's the signal to buy the dip? Because obviously this is a big question, the S&P 500 and things like that. They've seen a really quite radical pullback. But when do you buy in? And obviously, is it now or do we go further? It's hard to tell because, you know, one side of the table, we've not actually seen the material impact this has had yet on businesses. You know, businesses are on red alert standby right now. A lot of them in the UK at least don't even know what's happening in reality. And so whether or not they need to streamline, restructure, lose staff, All of that is going to happen basically over those decisions the next 1, 2, 3 weeks. So perhaps then we might see a little bit more downside to come. However, in traditional times, what we would look at is improving macro data. And the way that we do that, maybe by one simple indicator, would be something like a PMI, the Purchasers' Managers' Index, more forward-looking soft data where we get a sense of when, um, when is general sentiment start to be picking up. Because then that could give us a kind of a lead indicator of that happening. However, now I'd say really people aren't so much looking at that. I think what people are looking at— we've mentioned this before— and it really is this chart. I mean, it's the chart about this yellow line here, and when does that start to, to become more shallow and in fact plateau like what we're seeing in mainland China. I think any definitive pattern of that then starting to hit or coming towards its peak. I think that will be a key signal then, in combination of course with governments being able to continue to really stomp up the cash in order to stimulate economies, is going to be the telling sign of that, that moment of when that potential opportunity might come in that respect. Um, finishing off, a quick look at the calendar just to wrap things up. There's not really a great deal coming out today. I mean, existing home sales coming out the States, there is a couple of sovereign updates coming out for the likes of the EU, Moody's and S&P on Spain. You do also have futures and options expiry on all of the European, US indices today, and so a couple things there to be aware of here in the expirations. But overall it remains the same in regards to what you're watching in financial markets at the moment is still the ongoing sensitivity to the coronavirus. If we're looking at, say, general markets this morning, yeah, the DAX is up nearly 500 points, US index futures a decent move higher already, crude is back up $2, and you can see here crude already just now having a bit of a first resistance at that key technical point. So you can see, you know, people just chasing the market up to that level which we were just looking at, and it's just holding for now. $28.28 is going to be quite key. Probably we won't break that until we get into the full swing of the US session, whether or not they want to take that lead and push it back up higher. But bearing in mind that we were rallying from incredibly low base from yesterday, so we're already up a good $7 or so So be interested to see how that behaves in the North American hours. All right, that is it for the moment. Again, we are going to continue with these, but please do subscribe if you're not already have done so, and please do share our kind of link or our channel. We'd hugely appreciate it. It means a lot when you guys are leaving comments and stuff like that as well. And obviously going through these challenging times for everyone, we'll try to do the best we can. So stay healthy, stay positive, and I'll catch you guys on Monday. Alright, thanks very much.