Stocks recover for 'Best Day in 5 Months'

Hi guys, Wednesday the 5th of June, just coming up to 8 o'clock here in London. Hope everyone has had a good, good rest and ready for the day ahead. The calendar certainly looks like it should be a promising one, and after yesterday's moves in the market, which we'll come on to shortly, could well be another decent day for trading after perhaps the the Monday was a bit more lackluster. Price yesterday was moving in quite a nice fashion, helped mainly by the guy on my right, Jerome Powell. You can see the headline there, uh, ready to act if trade wars hit economy. The guy must be going to sleep each night just praying that a trade war gets done so he doesn't have to cut rates, which by all accounts is pretty much priced in to these markets. But the fact that he was coming out yesterday and all but confirming they're going to do so if the, the current state of play remains the same. The markets loved it. And we'll have a quick look over just yesterday's, uh, trading opportunities if you'd like. Now we'll have a look at the, the S&P, and stocks had their best day in 5 months, uh, in the US. And you can see what this looks like on a chart starting, uh, the last couple of days, a failure to make that double bottom. And, you know, you've got to give it credit where credit is due. Yesterday's briefing, Anthony did mention how he thought stocks would recover, how we wouldn't get a similar down day for the FAANG stocks as well, and price duly pushed on. We can see here just coming under a bit of pressure this morning to what was the, the low of the day. I wouldn't get too excited about this just yet. Obviously got the, the cash open, uh, for for the, for the DAX in 5 minutes. So it'll be worth keeping a close eye on that. But stocks really, uh, pushing through every obstacle with, with ease. Obviously the cash open comes around and this was a really nice trade opportunity. I saw a couple people got in the push above the, the previous high that came back down around about 3 o'clock or just, uh, before to find support for that push higher. And I did see a few people were still in the the market when we pushed to 2,800, which would obviously been late last night. Some really good trades there with the, the dovish Fed from yesterday. Obviously gold has continued its journey higher this morning, obviously helped by perhaps a bit of risk-off into the market. But the, the, the dollar has of course weakened over the period of, of a few days, and gold has really been on some sort of journey as we pushed higher. A market that had been struggling for a while, uh, pound also had a decent end to the day yesterday. Seems like a bit of a relief from that 26 failed test at that trend line and multi-week, year low as well. Although we are starting to see a tiny bit of a recovery here in, in the dollar, and we do have a plethora of Fed speakers later, so promises again to be an interesting day speaker-wise, which is what moved the market yesterday. We did have some data out, of course, but in the term— in the, in the way of, uh, scheduled releases data-wise, it wasn't that that moved the market. We did have some comments from, uh, Fed's Evans as well, which at the time were, if anything, deemed hawkish from the market. And the euro certainly came back down to the lower part of the day. And you can see here was almost touching the pivot before Powell did come out. The euro, I guess, was stuck within a bit of a range yesterday. It was really the, the stock markets that loved Powell's comments the most. So I'll just be keeping an eye going into the morning what the DAX is doing. Now back towards yesterday's higher point that we reached around 2, 2 o'clock, 1:45. So keeping a close eye on what happens in a few moments. Back to the headlines, uh, obviously Jerome Powell the, the main mover, but also yesterday what we had of course was the, the Trump and May meeting. I don't know if anyone watched this, it was, it was quite fun to, to watch the, uh, the two of them just enjoying it actually and, uh, having a laugh and joke. A lot different to, uh, if you remember the, the Sun headlines from last time Trump was over, where he basically threw May under the bus. There was none of that, no talking of any of the touchy subjects— Iran or Huawei. Really was, you know, quite nice, if you like. And of course, Trump came out with a big promise, promising a phenomenal post-Brexit trade deal, which is optimistic to hope for. Uh, the time duration on, on this, as we know, could be, could be incredibly long. Uh, so I wouldn't really get too carried away. But the pound, I guess you could argue, uh, liked it a touch. It's, you know, positive, uh, for the pound outlook, but really not, uh, something to get too carried away with at the moment. Uh, evidently the leadership race is going to drive the the pound shorter term. And what happens from there, whether we get a deal or not, then we can start talking about these things in a bit more future— in, in the future, I should say. But Trump, uh, his comments on the— on, on Britain itself, it's the greatest alliance the world has ever known. Uh, all of these comments obviously helping the sentiment just increase a touch. A trade deal with the US, of course, is, is probably some way off, and then would even be determined by how the, the UK split the EU as May's plan envisioned. If they do stay close to the EU, then in order to negotiate a free trade deal with Washington is going to be incredibly unlikely. So be keeping close tabs on what happens come October 31st or beyond. Do we leave with a deal or a no deal, or does it all get pushed back and so on? So It's something just to put on the back burner, remembering these comments, and then see what happens in the future. As we know, Trump can go back on his word instantly. Yesterday was talking about how everything is on the table, including the NHS, and then did an interview with Good Morning Britain taking it off the table effectively. So yeah, I wouldn't get too carried away for, for now. If we talk about trade negotiations that the US is currently doing the, the one with, with Canada and Mexico, which was simply just amending an existing pact, took over a year. And still the deal's fate remains unclear amid objections in Congress. So this is, yes, a tiny bit of a positive, but not something that I would be coming in today and just buying the pound as simply as that. If we do have a look at the, the pound yesterday, of course, uh, the, the dovish Fed helped push push us higher. Uh, but you know, if you look at just yesterday's price action here, you couldn't really argue that much of it was down to this meeting. So in summary, good news for the future if true, but I wouldn't be getting too carried away. And just having a look at this trend line from yesterday, actually that's quite nice, coming up to test that now. Previous high of yesterday, 127 handle. Technically really nice here for the pound. Is the dollar going to keep strengthening or is this level going to hold? It would be one to keep a close eye on for now. With the, uh, the leadership race, uh, I've just seen a really good tweet here, um, from Adam Linton, uh, one of the guys at Randscorkin, just about the process that it has to go down. So any MP wanting to be leader requires 8 supporters to be in the running. So this is their way of getting rid of the, the deadwood, effectively, uh, to sound harsh, I guess. Uh, nominations will be open and closed on June 10th, so 5 more days for, for the guys to, to get their names in. Cleverley withdrew his nomination yesterday. It's the first one I've seen, uh, to, to do that. Uh, field will be reduced to 2 in a series of votes, those votes taking place on the 13th, the 18th, the 19th, and the 20th. And then candidates will need to receive at least 16 votes to survive the first round, 32 to survive the second. The candidate with the fewest votes will be excluded in each round as we get down to the nitty-gritty. And of course, this could, could take a while, but Conservative Graph Group members will have the week beginning the 22nd of June, so 17 days from now, to the week beginning the 22nd of July to choose the winner out of these two in a postal ballot. Now, if it was to completely drag on and, and so on, which of course it could— worth noting that of course in August you have the recess period, Europe away. So even if we do get a new leader in by then, is much going to get done in August? I very much doubt it. Which leaves us September and October where there's political things going on as well. So to get a deal, a change in the deal by then, I think is is quite unlikely. Um, and then, you know, even if we do in Parliament agree a new deal, are the EU going to accept that? I think there's still some weight to be had for the pound. And Boris is reaffirming his position as favorite. Obviously the court order weighed on his odds a bit, but if he is to come in— and I think Gove is still second favorite— I do believe we will start to see just a bit bit more of a down move, uh, in pound, uh, maybe not necessarily against the dollar right now, as of course you do have, uh, the, the dovish Fed. But if we were to take a look at a market like the euro pound, then let me just bring that into position here on this longer term chart. You can see yesterday was the, you know, the biggest down day, if you like, the pound strength that we've had since, well, 3rd of May. So really strong push higher And, you know, I'll be keeping a close eye on what happens around here price action-wise. Incredibly important going back to the 28th of November that we had the breakthrough there, of course, beginning of the year, to find resistance in February. And we're now tracking around that point. So I don't think the pound is out the woods, um, certainly not against other asset pairs. Maybe for the dollar short term, uh, but in times of uncertainty, you can see people buying the dollar back. So I just wouldn't be— I'd be just slightly careful, uh, there. Going back to the, uh, Jerome Powell comments. Now, this was arguably the best opportunity in hindsight, uh, to, to buy stocks. But, you know, if we do— you know, we'll have a look back at the, the S&P in a moment. It was already going higher. It recovered quite a bit. Uh, if, if someone had said to you beginning of the week on Tuesday you know, the FANG stocks are going to be down X, Y, and Z percentage. You're thinking, wow, what an opportunity to get in, what an opportunity. And effectively, that is, is what happened. Those comments from, from Powell speaking at a Chicago press conference signaling the central bank stood ready to cut interest rates, saying it would act as appropriate to sustain the expansion amid the economic impact of escalating trade wars. So I mentioned he's going to bed praying for a trade deal to be agreed, and that's still very much the case. We do not know how or when these issues will be resolved, he said in remarks that helped stoke a powerful rally on Wall Street. And not just in Wall Street as well, you can see if I just bring in the Nikkei picture, just because I could see out the corner of my eye, uh, you can see, and again, you could argue that was the S&P or the NASDAQ or the Dow or the DAX, a strong rally, and just coming under a bit of pressure this morning. So stocks loving life yesterday, understandably, but can that continue or not today remains to, uh, to be seen. Uh, we are closely— and he went on to say, we are closely monitoring the impact of these developments for the US economic outlook. And then referring to tariffs which have been in the past month been raised on imports from China and threatened on imports of Mexico, he said the Fed would act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. Whether that will happen or not remains to be seen. And just on the the trade deal, or potential trade deal, with the UK and the US. It's worth just having a quick look over here at the current state of play with Britain. So Britain sending half of its goods exports to the EU, but only 16% to the US. So Trump saying yesterday that it could nearly double or triple, which really probably means less than that, of course. But at the, you know, their current trade deal. But at the moment, you just, you can see the importance of the EU in that. And I think any leader coming in, even with these promises from our greatest ally, needs to be a bit sensible early on. But then, you know, on the flip side, you'll have plenty of people saying, listen, let's get out with no deal, start afresh. Yes, it's gonna be, you know, a struggle for the, for the coming years, but the potential is you know, so high in the sky, and we can get this massive new trade deal which triples with the US. Well, it sounds all good on paper, right? Whether it's realistic or not, um, all of course remains to, to be seen. Also yesterday, uh, overnight, uh, let's have a quick look at, uh, WTI on the charts before coming back to the, the API figures. Not a bad reaction actually. The API, you can see here usually not as big as, as this. You can see we, I guess we started 48 down to 85. Quick math, 60 ticks, which is a decent reaction. And you can see those numbers coming through there for the API figures. All builds, all builds. Crude, uh, you know, a big switch from the, the drawdown of 1.8 expected to a free and a half million barrel draw after 4, um, 4 straight days lower. And of course, the worst May in, in recent times, managing to have an up day yesterday, but underpinned by raising trade tensions. The global economic picture has deteriorated. These are the comments coming out overnight as well. But this surprise price build, just weighing on, on price a touch. Obviously DOE's later today will be the, the main— out, well, all things considered, will be the main driver for where this market finishes. With the correlation of S&P and oil, I guess you could argue a bit of a breakdown yesterday, but at the same time, the failure to, to make a new low despite that build Could be telling, could be telling. Maybe worth having this trend line drawn up today for, for later on, uh, as well. Uh, acted quite well yesterday, the, the trend line in a gauge of sentiment. Uh, you can see this one from the low through the effectively what were yesterday's lows that broke, opportunity to get short, and once we got above, uh, as well to, to go long. And those guides of sentiment are pretty key. I mean, just looking here at the the S&P. The comments yesterday from Powell about a rate cut will completely split the market. You'll have people saying, well, if they can't even deal with rates at this, well, this market is incredibly over, overbought still, and we're going to come crashing down massively. You've got as well the, the trade situation, which isn't good. You've got the idea that we're in a recession. I know the stats over the weekend were that It's the longest the US hasn't been in recession since 1900, potentially. Obviously, data could prove that otherwise, but the recession fears, the global trade fears, the global slowdown— or, well, this market's got to come down. On the flip side, where you've got lower rates for longer, um, potential of, uh, you know, another round of QE coming in, where this market's got to go higher and higher. I did see an interesting, uh, article on, on Twitter on my way, or was it, uh, maybe last night, having a look about the, the impact historically of, uh, lowering rates in a rate cycle or pausing and the impact of the S&P. And it's very much been an indicator that it's near the top. The only, you know, point I would make is where the markets are different to what they were previously, you know, you didn't have the, the whole aspects of QE. And myself, my personal opinion is, well, we're going higher, whether it be from right now. I mean, from a personal point of view, I'm slightly, slightly annoyed we didn't get down to 2720. And the fib is— that was my entry should we have held. I didn't have orders waiting there, um, but it does look like we've, uh, we pushed higher. But yeah, my, my personal view is we do continue to push on. Ever since coming into the markets in 2014, this market is just battled away. You know, the China slowdown, Brexit, Trump, in a matter of days and pushed higher. And, um, I think that's still going to be the case. But the idea of, of the sentiment, whichever way you have this bias, where we're trading now, 2800 or just above, is, is absolutely massive for that. Let's remove the, the fib here, and you can see on the daily chart— and this is the futures, of course, we're looking at— but just in terms of price action, really, really key, uh, to, to keep an eye on here. and how we, uh, act around that level. Just having a quick look over at the calendar for today, I mentioned earlier it's going to be an interesting one. You can see all through the morning data out of Europe and the UK. The services number at 9:30, uh, out of the UK, obviously the one to primarily focus on, making up three-quarters, uh, or near enough three-quarters of the UK GDP number. That's expected at 50.6, uh, slight beat or slight, uh, increase of last month's. You can see we did have a number below 50 and we're flirting around that number for quite some time now. Yeah, it'll be worth keeping an eye on because of short-term volatility, but listen, you've got the Brexit scenario that's going to drive price. I think we've seen a couple of times where, all things considered, the pound should have moved with these data releases only to flick lower or higher or even not do too much. But data-wise, you can see, will be, uh, quite interesting to keep an eye on. Shortly got— shortly, I should say— got the services number out of Spain in a couple of moments before it all comes out of Europe. Then relatively quiet, I would say, from, you know, give or take half 10 to, to 1 o'clock European lunchtime, as you'd expect. So of course, maybe that's when you just reanalyze the, the markets. But then we do have the ADP number quarter past 1 ahead of non-farm payrolls on Friday, so good back end to the week here. And then we've got the composite, uh, final PMI, the market composite PMI, the ISM non-manufacturing and the services numbers at 2:45 and 3 o'clock before the DOE numbers at half 3. That alone would be enough to have people's interest. But we do as well have, you know, quite a few speakers here, so should be a good day for, for the markets, either scheduled or non-scheduled data or speakers as well that I would want to be on my toes for and ready to react. Having a quick look over the markets at how we stand, obviously just going through 8 o'clock, so we'll start off with the DAX here. You can bring this in. So it's continued its, uh, its move to the downside. Got an important level here of the overnight, uh, low from quarter past 7 UK time yesterday. So be keeping a close eye on that breakthrough, uh, to the downside early morning. You might see, uh, US equities follow suit, uh, as they're just finding support or have been finding support on the overnight, uh, highs as well. The NASDAQ, what a recovery, what a recovery. Um, again, that overnight high just being tested now. So keeping an eye on the DAX going forward. Uh, the dollar, I mean, it's pretty much exactly flat right now. So, you know, with data coming out, I'd wait, wait a bit just to, to get an idea what the euro against the dollar certainly going to do. 9:30 for the pound. Obviously got a lot of speakers in the afternoon as well. Um, but just before we have a quick look over some of the other charts, just with this euro, I think it's worth noting that yes, we have had a strong recovery, but again, it's like looking at the stock market upside down in, in the fact that, you know, if we do get higher— or I should say the FANG stocks— if we do get higher, well, what a great opportunity to look to go short. And where could that be? 114 looks quite good, this whole area, certainly from a medium-term trade. I think that overall the dollar is going to remain stronger than, say, the euro, all things considered. And this area between 114, 124 on the futures, I quite like. Uh, whether we could get that by the end of the week or not, I think remains to be seen. There's going to be a few twists and turns, uh, yet. But now stocks is finding a bit of support. Bonds just coming off their highs. We did have a bit of a break above this trend channel in the Bund, and T-notes also followed suit. You can see here, back up towards some of those highs from yesterday morning, but we're just retreating a touch. Any questions, as, uh, as usual, please do get them in the chat, or if you're watching on YouTube, in the comment section. But I hope you all have a great trading day. It promises at least on paper, to be a good one.