Stocks & Oil Recover In Asian Session. Can it last?

Hi guys and good morning. 21st of May, it's coming up to 7:45 here in London. Hope everyone has had a good Monday, good start to the week. Uh, it's been relatively slow and choppy for, for certain markets. We'll have a quick look over how we finished yesterday going into today. We're actually, as of speaking, just a couple year high for the US dollar, and, uh, the pairs are in turn moving lower quite quickly. The pound on the low of the day and the euro— we'll switch over here to have a look at those charts just as we're coming into the London open. You can see here I've got the euro just pushing through yesterday's low quite dramatically along with the pound. And also we're seeing a bit of strength come through, uh, for the dollar against gold here, pushing to its almost its low of yesterday as well. So the dollar overall starting pretty strong this morning, uh, the Aussie dollar as well, which will come on to, uh, under pressure this morning. And pretty much, give or take a couple of pips, has filled that gap on the futures market that opened up earlier on Sunday evening after the election, only to redo the gains that it had done. Over to yesterday. So we started, uh, yesterday morning pretty quiet until— and whether you want to give this any credibility at all— we had this tweet, or a couple of series of tweets, from, uh, Money China. Giving them some free publicity here for a non-verified account, but it was reported on a couple of newswires and the sentiment in turn started to follow through to the downside. A couple of the, the tweets doing there were, uh, China may temporarily hike rates for Apple, and then the main one, all trade talks with US are halted. So a fair few were reporting it was on the squawk, and while they weren't giving it the credibility, uh, you started to see stocks perhaps just drift lower a touch and The DAX here, I've got really starting from about 9:00, 9:30, did start to tick lower, and that gave the cue for US equities to also do the same. The S&P, after breaking through this, this trend line that you see from the 15th, again 9:15, 9:30, we had that further breakdown really then to S2 where we found a double, uh, double bottom. Also, uh, the NASDAQ fell through the floor as well around that time as the, the tech sector really started to get a hit. However, we did see a bit of recovery into the back end of the session and overnight in Asia as well, which we'll, we'll come on to. Other main movers, I mean, you had a, a really relatively quiet day for, say, for, for gold. You can see it was in that tight range. Aussie dollar after pushing through higher overnight. The R1 offered a good level, uh, of, uh, support for that long before the RBA, uh, came out overnight. Also yesterday, oil, we had that breakthrough around the similar sort of time. So as stocks were coming under pressure, trade tensions were picking up, and you also had that follow through from oil, only again, like with stocks, to recover into the back end of the session And there's been some comments over overnight on expectations of what OPEC are going to do, uh, and also from Saudi and Russia, which could of course move this market as we head into a couple of important OPEC meetings coming up. But again, it's worth pointing out that oil is really stuck within this range. It perhaps pushed to the top end last week, but we've now got a relatively small range here. You can see it just over dollar or so. So not too much going on yesterday other than, uh, really the trade tensions continuing to, to weigh on things in the morning. The main mover overnight so far, as we'll come on to, is the Aussie dollar. However, stocks, just as we come into— well, not far away from 8 o'clock— just remain void for now. Uh, if we go to the, the main sort of stories from overnight, so the main headlines coming through, and it was you know, I always like to do it on the, on the way into work. Just get, get Twitter up, uh, and just check the, the main headlines, what's there. And you can get a feel for the sentiment just from, uh, the headlines as a whole. And, and many were like this one here that you see from the FT: Global stocks gain as investors track latest trade upheaval. Stocks positive in, in Asia, uh, and, and so on. So we're All things considered right now, expecting to see a push higher in stocks. I think the way to, to look at it to the downside would be like yesterday with the S&P, to draw on these trend lines. And if they were to break, fine, sentiment may start to change. But however, uh, just the headlines and sentiment at the moment does very much seem, uh, that we are going to get a bit of recovery in stocks and in oil price as well. Uh, over the, the weekend, we, we obviously had comments from Trump, which were incredibly hawkish. Will was talking yesterday in the briefing how the US were stepping up their rhetoric, and the ban on Google on Huawei has weighed on things as well, suspending the delivery of certain software. However, late last night in the US session, where you saw the recovery of stocks, they did— well, the Trump administration announcing that they have issued a license that will allow US companies to keep doing business with Huawei for the next 3 months in a bid to contain the fallout from the export restrictions on the company. This easing, uh, did help stocks push on. If we just go and have a quick look over, uh, at US equities into the back end of the session— oh, let me just change this one here to the NASDAQ. You can see, uh, if I just bring that into picture. You see the recovery really from around about 8 o'clock into the back end of the session. And of course, the S&P and Dow Jones, very similar. Just quickly looking at this from a technical point of view, mentioned, uh, sorry, favoring the, the upside. Uh, if we were to, to get a push below the, the pivot and previous high, I think that could be the point where you start to see a further push lower, and then we start looking at the lows of the day and so on. And then to the upside, I mean, we're in perhaps this, this little range here. If we can get back above what was the, the low of the, the late morning and previous opening price yesterday, above 2861, then you can start to think this market might just be pushing higher for now. But as you can see, we had a decent recovery into the back end of the session. Uh, it's, it's quite an interesting situation with stocks at the moment. I think this one here, I'm trying to look for the, the longer term chart. I'll just put this one on for now. Hasn't got the diagrams like usual, but you can see from the, the double top, if you like, or the previous all-time high that we had back on, uh, back in October, September, we had a little breakthrough early May only to, to drift lower. And I saw a quite an interesting tweet on, on Friday. And you can see here that 5.5% move lower on futures. And it was saying, you know, you ask for a dip, you ask for a correction to get in to buy, and then it gets there and you bottle it. And that is trading psychology in one tweet right there. It's, uh, it's quite an interesting thing, you know, when you, you identify a level. And, you know, I know we were talking about 2790, it didn't quite get down there, but even if it did, you know, you have to feels at the time be pretty brave to, to get in. I mean, look, if right now you could identify, you know, this, this point in the market here where you had the low of the 8th of March, 2721, oh, I would love stocks to be there right now. What a buying opportunity it would be. But if price gets down there, it gets down there pretty quickly. Obviously you can understand people perhaps not wanting to get in, uh, into that market. But yeah, having a look at stocks, obviously with the, the trade headlines coming out more frequently now than in quite some time. It's a tricky one to predict overall where this market goes. Have we seen the low, uh, around 2,800? With everything that's gone on— I was speaking to Tommaso yesterday and he was saying with the, uh, the delay of the trade talks, with this negative sentiment picking up day by day from Donald Trump becoming, uh, very hawkish on the matter— if it can't even break 2,800 Uh, you know, is this actually the method? We were saying perhaps the time where we now do start to see the push higher in S&P, as we've got it on the chart, back to towards 3,000. I don't know if that's right yet. I wouldn't be too surprised to see, like with oil, as I was saying yesterday in the, the strategy report, that we do drift lower to then have a final push. I think Trump is— I think, well, listen, I think Trump actually— people give Trump credit now. I think they, they appreciate He knows to an extent what he is doing, and he is clever enough to know that if he's running for 2020, which it appears that he is, he needs stock markets on those all-time highs. And he's got to time that as well. The last thing he would want is— and I know Ant was mentioning this last week— last thing he would want is price to keep going and going, and we'd be at 3,000, 3,100 now, and price has to start correcting. And that being the main 4 of when he is running for the election. So I think he's going to time it. Uh, he's obviously over the last couple of months started to pick up his hawkish rhetoric on the price of oil as well. Um, and if I just actually analog overlay the, the oil market here, and you can see, I'll just change the Oh, there it comes quickly. Analog. Let me just change it to make it clearer for you guys to see. So yeah, with him picking up this, this rhetoric on oil, and you can see just how correlated— I know I talk about this a lot, but you can see those highs in October, the low Boxing Day, and the recovery since then. Uh, however you perhaps got this, this key from oil that we were starting to come back down lower in, uh, in US equities. It took a couple more days for US to do that, but with Trump picking it up, you can understand why stocks are also just starting to slow a bit. However, overnight with OPEC, uh, almost putting the two fingers up to Trump again, you have seen we're coming to the top end of this range for oil. Now if that was to, to keep going and oil was to say break $64, $65, well then you suddenly look at S&P back towards the highs as well. On this point with, with oil and equities, you know, Trump has seen, you know, how negative— if we go back to September, October— negative headlines influence the stock market. He's seen how positive trade comments also boost price. But also what he's been doing in this recovery which has been stronger for equities than it has been with oil. He's also attacked the Fed, and in turn they've become pretty dovish as well. So even, you know, in an ideal world for Trump, he would have stocks all-time highs into the election, and he would have oil price a bit lower. Really, the only way to do that would be to have an ultra-dovish Fed where the stock market, you know, borrowing costs lower for longer, would, uh, would keep pushing higher. However, I'm not too sure that can happen, although Trump will obviously do his best for that. Speaking of oil, we just go back to, uh, the headlines here. Uh, we had a bit of a rebound, as mentioned, overnight for, for oil price, um, in a relatively choppy session, it has to be said. And I think for, for oil over the last couple of weeks. It's, it's been in such a tight range, predicting where it's going to go medium term has been pretty hard. If I— and before we come back to this story, I've got a couple of old charts. Here's one I made earlier. Here's a couple of old charts just of the, the most recent range. And this is from May here where the, the mouse is. You can see it's just a $3 range and for, for oil over a period of, well, over a couple of weeks really, before we potentially try to break out of it last Friday. You can see just how choppy that has been. We are, like we said, at the top. So, um, some positive— or for the price of oil anyway— comments out, uh, overnight have, have helped buoy things. But yeah, it's, uh, it's an interesting one for the price of oil, especially given the correlation with, uh, with equities. Those comments— and we can have a quick run through here— it's Uh, you had on, on the side of Saudi, they were saying how they were happy to— if I just bring this in, uh, well, before that you can see the, the 40%— actually, this is a good point here, just having a look at oil price going from that December low. The recovery has been, you know, fantastic up to where we are now on the futures from that December low, 49%. The high was a 50% move, uh, in a matter of, well, just over a quarter. Such a decent push higher, you know, you could absolutely expect a recovery. And Trump has been kicking off really going back to the middle of March where he's saying oil prices too high and all of this kind of stuff. Anyway, um, at the weekend meeting— oh sorry, I didn't have the charts on there. There you can see the, uh, the push higher around 50% to where we're trading now. That high from the year, 57% as well. Um, back to, back to the headline. Uh, the, uh, the weekend's meeting of ministers, Saudi Arabia and other nations signal they prefer extending the production cut agreement until year-end. We need to stay the course and to do that for weeks and months to come. Obviously this would be bullish and the two fingers up to Trump and the continuation of, you know, status quo for now rather than increasing supply, which Russia did say they were happy to, or they're ready to consider easing cuts if the market needs more crude. However, Russia would comply with any agreed output limit in the second half of 2019. Now, the There was a couple of comments actually out just before I did the briefing, which I'll have to look into and I'll post into the chat, about the next OPEC meeting being delayed again. We previously had a delay not long ago as they wanted to see the, the implications of the, the Venezuela situation. But you've also got here, um, I've just got a message. Do Americans know what two fingers means? I'm sure, I'm sure they do. Um, as well. And also the US-Iran situation at the moment is, is helping boost price a touch. So if you're asking me right now, what do I think for the remainder of the day and the week? Well, I think oil could actually break out of this range and get towards $65. That's not to say, uh, it will. You've got the API tonight, you've got DOE tomorrow, you're going to have OPEC comments coming out as we approach this meeting and the weekend picked up. You've got the US-Iran situation, but at the moment favoring the upside. At what point chart-wise would I look at potentially getting short? Well, I think really unless we get below this, this bottom end of the range around 62— and this is future— 62.50, around this area, I would prefer, certainly medium term anyway, to, to look to be getting long. That in turn then should help boost stocks higher. I've already mentioned intraday where I would feel comfortable getting short, and that being sort of below 28— well, the pivot 2850 area. But if we were— we have oil to break out of that top end of the range, and you've got to imagine S&P is going to push on, and a long above 2860 doesn't seem too bad. Looking at this more technically, we have a quick look over a couple of the charts to just while we're here. Key level for S&P and equities in general would just be that breakdown that we had late last night, uh, late, uh, sorry, morning yesterday, uh, where the S&P pushed lower, the DAX, the Dow Jones. Keeping an eye on that. Obviously the sellers really taking over around that point. Should we push on, could expect some decent resistance like we saw a couple of times yesterday. We broke through significant lows only to then find resistance on the way back down. So on the futures, 2865, that area. Just having a quick look over some of the other markets. I mentioned that the dollar is, uh, strong this morning, up, uh, 0.16%. That has come off a touch, but you are still seeing the pound on its lows. And one market to keep an eye on for any pound traders is of course euro pound, which yesterday, and it looks like probably today as well, has had another update. And that makes it 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 straight up days for, for this pair. Uh, the double triple bottom from March, uh, and then of course late April, early May, uh, has proved decisive and we really have pushed higher. And Brexit developments overnight, not too much, not too much, but the sentiment is obviously weighing on things. On the flip side here, you've got pound against the US dollar. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, including today, down days to the downside. So sentiment really weighing on things. Um, I was with the, the strategy yesterday. I know Tommaso was looking at a long should we break a trend line— a short, sorry, should we break a trend line. I think you've got to go with that. I think the, the sentiment very much is to the downside. Who's going to take over from May, when is she actually leaving, is there going to be a deal. If the next person comes in, at the moment they're, you know, expected to be in favor more of a no deal or a hard Brexit, and, and that's weighing on things. On the flip side though, I do feel there will be a good opportunity to get long eventually in the pound. However, I have been saying that for a while, so it might have to be a bit of patience on that one. Coming on to Australia, uh, we had the, the election over the weekend, uh, which obviously boosted, uh, the Aussie against the dollar and its other FX pairs. And we, we had a good opportunity. I know a couple people were looking at the, the chart yesterday at an area of the, the R1 to, to get long again, and it did work into the back end of the session. However, we had the, the RBA comments overnight where the central bank suggested it could cut rates in June and August, actually. So they were talking about lowering rates in, in June to 1.25% and then 1% in August. The idea behind this, a lower cash rate would support employment growth and bring back, bring forward the time when inflation is consistent, uh, with the target. Given this assessment, at our meeting in 2 weeks' time, we will consider the case for lower interest rates. It takes me back, these kind of comments, to, uh, one of the, the simulations we, we run with the career program and internship of the, the portfolio manager simulation from 2011, when the ECB was signaling they're going to raise rates and raise rates and Regardless, uh, what the Aussie do, by then it's going to be priced in that they are going to lower. So if they don't, there'll be obviously a good opportunity for that long. And if they do in line, well, the limited reaction will, will be there, and it will come down to the comments from that meeting and the minutes that really drive price, uh, as well. Having a look over the, the calendar for today Yesterday was relatively quiet. You did have some speakers out, Powell not really doing too much, moving things overnight. But again, today it's relatively quiet in the morning. So looking at the follow-through, uh, overnight favoring stocks to, to push on unless those support levels were to go. I think it's a case of just a bit of risk on in the market. The dollar is still strong, I think. Against the, the pound, the euro, and certainly the Aussie. Looking for areas to get short, uh, would be the, the favored, favored play for, for now. Obviously we've just gone through 8 o'clock, so we'll keep an eye on the DAX in a moment. We'll just have a quick look over. But going into the afternoon, existing home sales really, uh, and consumer confidence from May, the, uh, the main highlights. And, uh, if you were to choose a couple of highlights to excite your day, they wouldn't be number 1 and 2. Speaker-wise, you can see we do have a fair bit this morning. Uh, Carney speaking at 9:30, so one to keep an eye on for any pound traders. Uh, also got a couple of ECB speak as well before Fed's Evans in the afternoon and Rosengren to finish off at 5 PM, uh, as well. Just having a quick look over the DAX just to see how we are trading. On the, the increase in volume. Relatively choppy for now. This is what I'm talking about though with the, uh, those, those trend lines. Worth having these on, especially in equities early morning, just to see are we respecting them. You can see to an extent we are here going from that back end of the, of, uh, yesterday's session. If that was to go well like yesterday morning, you might get a follow-through. However, I think just with sentiment from this morning favoring the upside, just be a bit careful about getting too aggressively short without the, the indication that we are going to push lower. Uh, any questions, as usual, guys, please, uh, do let me know. Relatively quiet, uh, start to the morning from a data point of view, but any questions, please do let me know. And I hope you all have a great trading day.