Silver Future Up Over 7% As Reddit Army Take Aim

Okay, very good morning to you. Hope you had a great weekend. It is the 1st of February, Monday, and much of the talk of the town this morning is about silver. I'm going to touch upon it and we're definitely going to look at the charts because silver futures are up around 7%, a gap up opening, a bit of a driver at the open of electronic trade last night. As Europe come in, it's teetering around its initial high seen in the overnight session. Um, Tim and I, one of the senior traders, we did a short video last night for the community that we put out, so please refer to that if you want to see more details specifically to get under the bonnet of why that move is happening. But I am going to give you, as I said, a bit of an overview, and let's kick things off straight away with that because I kind of want to then put it aside to talk about there is other things going on right now. Uh, has been a very interesting time, of course, because obviously coming on the coattails of GME and all of these other, um, kind of heavy short stocks that have been in focus from the kind of Reddit WallStreetBets crowd, uh, it definitely is still dominating a lot of the media cycle at the moment. But I think it's important that this week from a macro perspective, there are lots of other things going on. Uh, we've got over 100 companies in the S&P reporting. You've got Amazon, you've got Alphabet, You've got a number of important macroeconomic data points, the ISM PMI numbers coming out this week, ADP, nonfarm payrolls. You've also got bank decisions coming out, the RBA, the BOE. So there is other things going on. I know it's hard to, to realize that given the media fascination with these kind of short stocks and the squeeze that are going on from the retail community for the moment. But away from that, I think it's important just to understand that from the broader asset classes that I know a lot of our guys look at, which is to call kind of more traditional index futures in terms of, say, the currency pairs, dollar-based commodities in respect to oil, gold, definitely, I think, and silver for sure. We need to monitor any potential spillover that we might have from this kind of Reddit community. But other than that, you know, there are other driving factors, and in particular things like the stimulus as well, which I'm going to update you on. In a moment in the US. So let's just talk about silver quickly then. What, what is going on? And perhaps I could just get the chart up quickly and we can have a look at what's happened overnight to give some context. So here's the silver chart, and I'm looking here at price activity year to date. So if I just draw a line here, this would mark then the price activity we've had since the beginning of the year, essentially. So we saw a bit of a drop-off as we went through around the first week of the month of January. But then if you actually look going back to what would have been very early Thursday morning, if you remember, it was midweek last week when we had the likes of Robinhood and other brokers, Interactive Brokers and so on, all stop trading in some of those focus stocks like GME and AMC and so on. And then it was kind of the, the the leader of the swarm, as Tim put it, was putting out a kind of trade thesis about how they could target silver and how that would be, again, a good philosophical target to punish what had been, for many different reasons, an argument that the banks have had control manipulating that price. And so what we've seen since then is almost a 20% gain in looking at silver futures here from where we were trading, just since last Thursday. So the gap up that we've had in the overnight session was 7%. And look, you can see here as Europe are coming in, definitely there's a lot of attention on this story. And look, we've just pushed through session highs here as I've started hitting the record button on this briefing. So new session highs now, $29.45 at the high. And if I stick silver on a daily, there's absolutely no reason now that we won't have, I'm sure, a look and a test up and around the the $30 mark, which really puts us up at that, that peak that we saw when gold saw this really rapid rise in step with the likes that we saw with gold when gold broke above $2,000 back last summer. And definitely from a characteristic point of view, in terms of price ratios and so on, silver generally acts like gold on steroids when it really starts moving. It's a particularly lively character as a product. So yeah, just keeping an eye on this today for sure. The context of this of course comes on a few different things. One of the things, and the reason why the talk has shifted to silver specifically, is given the idea then that a number of brokers are limiting access to some of these stocks in play like GME. IG, for example, one of the biggest brokers for the retail market in the UK, said on Saturday that it was restricting any new positions in the likes of GameStop and AMC due to extreme market conditions. What we have seen as well over the weekend is a few other things. The data from the end of last week, the world's largest silver-backed trading exchange-traded fund, so the iShares Silver Trust, recorded— as you can see in this graphic here $1 billion in inflows on Friday, by far the largest I've seen ever since the creation of that fund. And that came amid reports that the premium for physical silver soared late Friday and into Saturday. And as Sunday rolled over, there was lots of reports on, you know, things like ZeroHedge, for example, showing a lot of these bullion dealers facing shortages of actual physical coins. Now, the idea here being that by buying shares in the ETF, you're going to force physical delivery of silver into funds' vaults, and thereby looking to create this kind of short squeeze on the market and push up consequently the price of silver. A couple things here to be aware of: on a more broad basis, it is more difficult for retail investors to influence something like the silver market as opposed to, say, a single stock equity given the large off-exchange market for these precious metals. Um, a lot of talk as well on some of the message boards last night was a lot of conspiracy theory, that a lot of this kind of, um, deflection of attention over to silver has been artificially created by hedge funds in order to then stop the targeting of things like GME. There's been a lot of noise about that as well, so I'm not here to kind of speculate too much about those sorts of things. But look, for the short term, there is a lot of airplay being given to this, this silver story, and it has played out. I mean, you can't fight what you see. This has definitely been the situation. I mean, we've gapped up and we've seen a decent push higher. And with this last little move we've had, even since I've been talking, when we closed on Friday, if I just mark it up from a percentage basis we are now up approximately to the high, nearly 9%. And that means then from that Thursday low, the day after really all of that situation with those brokers, we're up about 18%. So definitely worth keeping an eye at 30, the obvious target on the upside technically and from a psychological perspective. But going to move, move away from, from that for a moment and have a quick chat about some other things. And this is one of the other things I wanted to mention was about the stimulus situation. Now this definitely could well come back into focus this week. How important is it going to be? Well, this is where you've got to just monitor the ebb and flow of the discussion. The headline itself I think could be construed as being quite negative. Apparently 10 Republican senators have proposed an alternative plan for COVID-19 pandemic relief costing around $600 billion, um, and they, they said that would gain bipartisan support. The senators said they plan to unveil that plan today but offered some details including a proposal for direct checks of up to $1,000. So again, the value here on the top level of the package is much smaller than what Biden proposed of obviously at $1.9 trillion, as too are the direct stimulus checks, which are about $400 shy of what, what Biden was aiming for. Having 10 Republicans, and why is that number symbolic? Well, it's significant because that's the number to reach 60 votes in the Senate to pass bills under normal procedures. If you remember, it's not about then a simple majority on some of these points. They actually need 60 is the golden kind of figure unless they go through this kind of reconciliation process and so on. The overall proposal then, as I said, is quite a bit smaller. Does that constitute reason to the markets to have a bit of a nervous moment thinking that, wow, that's considerably smaller and that's just not good enough because the market's priced now for this near $2 trillion delivery? Well, I'm not so sure about that because for me this is just the natural process of a negotiation. Starting point A and B is always going to be wide on the initial kind of conversation, and before then it gets narrowed in and compromises are made. I guess the timing here is generally the further they are apart, the longer it's going to take to narrow towards something that would create some sort of consensus. And that in itself, I think, becomes more of a challenge then for markets to maintain a more positive outlook on on this stimulus delivery. So definitely worth keeping an eye on that throughout, uh, this week for sure. Having a look elsewhere, um, just wanted to have a quick look at the UK because some really positive news actually on the continuation of the rollout program of vaccines. A total of nearly 9 million people have now received their first vaccine dose, a record number of almost 600,000 people were jabbed on Saturday alone, according to government data. So yeah, definitely ramping that up at a quite considerable pace. And of course, this came— comes as the UK aims to offer vaccines to around 15 million people by— in the top 4 kind of priority groups by the middle of February. So does this change then the idea about the loosening of the lockdown on the timing? Well, no, the government's already kind of last week moved that over at least until the beginning. I think it's March 8th, so I wouldn't be expecting any shift on that. But definitely a positive thing, both from, let's say, a market's perspective, but also, you know, from a, from a humanitarian perspective. You know, it's really pleasing to see that they're being able to accelerate that program and get more people vaccinated. Just having a quick look at the, the sterling chart this morning. This is looking at cable. I'm looking at cable here on a 90-minute, um, capsulating some of the year-to-date price activity. Again, this is 2021 price action, so over the last month there's a couple of areas that I am looking out for. In particular here, I'll broaden this out on a longer term chart, but this has been a really key level and it's another key level today. In fact, you've got the R1 sitting just above this 137.50 marker, looking at the futures market here. And that's been a real area of upside resistance for this, this market. And if I flip over to a daily, you'll be able to see even more so how that's played out. That goes back to the 2017 late summer high, that dip that we saw in beginning in Feb of 2018, and where we failed to really push on above. So, you know, kind of generally what markets' medium-term view perhaps is that we then start to see the return of the kind of weaker theme. And inevitably then, with things like that being the key factor, but technical breaches above these levels starts to open up potentially and the next push up to cable. But it hasn't materialized as yet. We've really failed to really push on or close significantly above this point. And so it's worth keeping an eye on that today, given how close proximity we are at the moment. And above there, the The other area just keeping an eye on is that trend line that goes back from the year-to-date price action. It has played out well over the last, last couple of weeks. So if we did break above here, this current point at 137.50, I'd be looking out to target up and around that, that trend line high. Quick look elsewhere then, other things to do with the UK. You do have the Bank of England interest rate decision this week. I'm not particularly getting overtly excited about this, to be quite honest. There's not expected to be any type of policy change. I guess the, the main takeaway points here are a few. The next, the budget isn't coming till early March out of the UK. So for, if I was an NPC official, and I think this is how they'll be thinking, is that look, we've really got to see the government's fiscal policy for the medium term before we can make any judgment about what would be suitable for the next course of action with our own stimulus. For example, you know, things like furlough— is it going to be rolled over or not? You know, these will all have tangible impacts on the economic situation and then consequently the type of policy that will be necessary to use there, there, there going forward. This is one of the meetings though where we do get one of the 4 of the 8 over the course of the year. We'll get the Quarterly Monetary Policy Report update. Remember, the last time this came out was November So the world has moved on quite a bit now, now that we've reached February, in regards to predominantly how the vaccine has been implemented. The lockdowns, though, more importantly, have been generally longer and tighter than what people were thinking back in November. And so ultimately, there's probably going to be some tweaks to the likes of GDP, perhaps a little bit firmer in Q4 but a little bit weaker in Q1. I don't really think all of that really is too much of a market mover for sterling. The, the one thing that probably is going to be the talking point, as this headline Bloomberg would suggest, is the idea of negative interest rates. I think it's very important to understand that we're not going into imminent negative rates here in the UK. Could it be a policy tool in the future? Sure, it could be. What we're looking out for in this meeting though is more about this, uh, team that's been in conversation with a lot of financial institutions. They're due to come back and report their findings of the feasibility study of negative rates being adopted in the UK. And obviously the details around that could then give us an idea on how likely an option it really is for monetary policy in the UK. That's probably the thing that will be the sweet spot to look out for. Otherwise, quickly, just a quick word on Italy. The BTP market not seeing too much movement this morning, but there were reports over the weekend that Matteo Renzi of Italia Viva, the chap who was responsible for the kind of initial disruption, if you like, in Italy, pulling his junior coalition support for the Conte government— he came out over the weekend and basically, according to a party source, has said that the former ECB president Mario Draghi could become the prime minister. He would see him as a good candidate. I'd say Italian politics, not It's not unfamiliar to see a technocratic government being led by these types of officials. Mario Draghi is someone who has a very high-quality reputation, of course. La Stampa newspaper reported on Sunday domestically in Italy that the President Mattarella had already sounded out Draghi. Something to keep an eye on. Moving over elsewhere, a few other things. We've had a couple of data points from overnight. I'm not going to get too bogged down in this because quite frankly it's not really a focal point for for the way the market's performing this morning. But just as an update, the Chinese manufacturing— both the official China manufacturing and the Caixin market manufacturing PMI has weakened. The official number, I think it was the slowest pace in 5 months in January, and the market number came out last night, was the lowest level since June last year, albeit both numbers still above 50 in expansionary territory. Another article as well that someone did ask me about that was from the FT at the weekend was this: reports that Chinese warplanes simulated attacking a US carrier near Taiwan. The revelation underscoring Joe Biden's difficulties in easing tensions with Beijing and how important this was. So I kind of, I kind of see this at the moment as a little bit like what we've had in recent rhetoric out of Iran. Who definitely have become much more aggressive with some of their, not just their rhetoric, but also some of their military type of movements and so on within geographically sensitive areas. And obviously Taiwan is definitely one of those when it comes to the East China Sea in that area. And a lot of this I think is timing the shift of the administration going from Trump to Biden. I think a lot of these countries like Iran and China just want to make a very important political point by kind of flexing their military muscle. And I don't really see much more than that, to be quite frank. I think the overall take here is that Biden— I don't think he's really going to let up the pressure on China. It's just probably going to be less erratic than perhaps the chaotic approach that we saw somewhat under the Trump administration. So tensions will, I expect, to remain high and Definitely this ongoing trade spat is there in the background. It's just that it's being shadowed at the moment by a bigger, more near-term force, which is that of COVID-19, of course, and the restrictions and vaccine, which ultimately I think is more important. Again, one of the main things I've had a lot of macro discussions with different people is, you know, I think you've got to think about then the Biden hierarchy of needs, if you can call it that. What's his— what's the top of his political agenda? And I think when it comes to things like China and Iran, I think they just lower down to things like getting the stimulus done, for example, which is definitely the top priority at the moment. The other thing that's happening this week is you do have an OPEC meeting. Um, OPEC are coming out doing their, their monthly kind of gathering. Uh, we had some reports come out last night from a delegate, and on balance, taking OPEC+ as a whole, compliance levels were seen at 99% apparently for January, so still compliant enough, let's say. How important will this JMMC meeting be? That's the Joint Ministerial Monitoring Committee. So this is their kind of technical task force who go in to see about these compliance levels are being adhered to. I don't think this meeting is important at all, to be honest. They've already come out in January, told what the supply cut situation would be for February and March. So this is more just about a monitoring check rather than it is about anything to definitive for OPEC+ policy. So the main driving forces for oil I'd be looking at are still things like the general market sensitivity if they do remain nervous over this whole kind of Reddit retail trades assault on certain assets. But again, I think that is a very concentrated thing. I know it has impacted silver, but as far as those equity plays are concerned, it's very isolated and concentrated. To only a small group of stocks. I don't think it's big enough to really reverberate across broader market sentiment. And so looking at stimulus, I think will be quite key. Any updates, of course, on the whole, uh, vaccine COVID situation will be important for the demand side for oil. Earnings-wise, just quickly wanted to touch upon that, and then we'll look at the calendar. There are 110 S&P 500 companies reporting this week. We've got 2 of the Dow 30 I'm not going to go through every single one of these companies, but some of the highlights would include Tuesday pre-open Pfizer, ExxonMobil, BP. After the market closed, probably the, the biggest one as far as the, the bigger market cap mega tech names are concerned, Amazon and Alphabet. So that's Tuesday after market. Other notable ones Wednesday, Biogen, Spotify, Qualcomm, eBay. Thursday, Merck, Pinterest, Snap, uh, Gilead, Peloton. So a couple of those names which have seen obviously some, some substantial movement during the pandemic. And that's, that's pretty much it. So I'd say probably Tuesday after market for an index futures trader for the NASDAQ will be definitely the one to, to watch out for. And then let's just have a bit of a recap then for the, the overall week, uh, because there's definitely some important data points forthcoming. This morning you do have the various different manufacturing PMIs from the eurozone. I would not look at these as potential market movers because these are final readings, but this afternoon is more important. You've got the ISM manufacturing number for January expected at 60, so still a very robust number and up marginally from the previous 59.7. Going overnight into tomorrow, so this time tomorrow I'll be talking and updating about the RBA, but not expecting much change there in their latest rate decision. Rates in Aussie currently at 0.1%. Then you've got the Eurozone Q4 advanced GDP reading coming out tomorrow morning, expectations there for a contraction of 1.4%. On Wednesday then you get the service numbers out of Europe, but again these are final readings so I'd largely disregard that. Bit more emphasis probably on the flash CPI reading coming out later on that morning. And then from a US focus in run-ups and non-farm payrolls, you've got ADP employment change and ISM services index. Now just to wrap this up into Friday's payroll figure, um, generally speaking, we are looking for a marginal bounce back into positive job creation in regards to what ADP is likely to say and also non-farm payrolls. I think both these numbers are expected to show marginal improvements there. So from a non-farm specific Prospective expected at 55,000. That was against the previous negative 140,000 we had last month, which remember was the first negative, um, figure we've had in several months since really the main lockdown figure that was very low back in April. So ADP is expected to be similar, around +50, um, from the previous -123,000. So how important is that? I really don't think it's that important, to be honest. The number is still relatively low because there's still a number of restrictions impacting a number of key sectors for employment. Of course, the jobless rate continues to remain fairly elevated. I saw a really good quote from Alice at ING, which I think summarizes the sentiment with non-farm, which is that there will be no material improvement in jobs— this is more broadly speaking— until the market— in jobs market— until containment measures are eased. and the reality is that is something that isn't going to happen anytime soon given the slow rate of vaccinations happening in the US at the moment. So given we've heard from the FOMC just last week, Jerome Powell, I really don't think today's or this week's payroll constitutes a real moving of the needle, if you like, for the Federal Reserve in terms of their policy thinking. So definitely keeping an eye out on these, these data points throughout the week. The ISM numbers particularly and ADP could create catalysts for movement, But the overall culmination of the NFP, I don't think from a monetary policy macro point of view, is, is too much of a game changer, to be quite frank. Thursday then you've got the Bank of England we've discussed, and then you've got US factory orders as well coming out. And then Friday, as I said, you've got Non-Farm in itself. So yeah, that's it. Quite a few things there to be aware of. Obviously a lot of focus still on the silver market. What's it doing now? Still sitting around that initial push high that we saw when we were showing the screen just a few minutes ago. So gonna leave it at that, let you guys get on. Any questions at all, feel free to drop me a comment. If you've made it this far in the briefing and you're watching this on YouTube, uh, please do like and subscribe. Really appreciate your support for the channel, and have yourself a good week ahead. Thanks very much.