Stocks Rotation Continues As Nasdaq Diverges Most From Dow Since 1993

All right, very good morning to you. It's Tuesday, the 9th of March, and just going to kick things off by looking at the heat map to get a sense of the ongoing great rotation that we're seeing in the US equity market at the moment as tech stocks got hammered once again last night. So familiar suspects there, the large-cap mega kind of tech names— Apple, Google down about 4%. Tesla down another near 6% as well at the close. And other than that, I'm going to talk a little bit about what that meant for the Asia-Pac session, how Chinese equities saw quite a severe turnaround off the lows on the back of some reported state-backed intervention in the equity market. And then also, I just want to highlight US bond auctions this week, which I think could be a significant catalyst potentially for short-term market sentiment as we trade the coming sessions, given this kind of focus on the yield movement of late. And so going to kick things off then, as I said, looking at the heat map. So a mixed performance here, um, tech seems weak, but financial firms, as you can see down here in the bottom left, and materials producers kept losses from being lost, if any, worse if anything. The S&P was down only about half a percent The Dow though was up 1% and the NASDAQ 100 future was down 2.9%. So really split performance there. And actually, when you look at the world in the division of this rotation, um, and then movement into these more, um, stocks that are tied towards this vision of the economic recovery as economies globally start to reopen, well then the Dow is within a whisker of its record high, whereas the NASDAQ 100 continues to come under pressure, down around 11% off its recent all-time high. And that divergence to that extent is the first time we've seen it to this magnitude since around 1993. Now I know that sounds like a heck of a long time ago, but I won't put too much emphasis into that. I think it's just nature of the fact of how price divergence amplified in the opposite fashion during 2020. So I think circumstance of the pandemic needs to be taken under consideration here, and therefore there's a bit of reversal, kind of catch-up, to just even things out into a more neutral state going into the latter part of 2021. That being said though, I still, as I said in the briefing, think that downside levels in the NASDAQ do warrant watching because these types of moves can then just beyond, um, fund managers rotating to position themselves accordingly, you do start to then get the more kind of speculative inflows, um, trying to jump on these emerging trends. And looking on the daily chart, I was looking at this yesterday, I was talking about this idea that the market could definitely have scope to pull lower, and I think that still remains true. And if I was just going to put an ellipse here One of the interesting things is from yesterday's price, or the price action so far today, is that we've had a bit of a retest up at that previous all-time high of resistance and support, which was quite interesting, around 12461. So that for me is now a bit of a, a barrier to the upside price. And on the downside, yesterday we had a retest back at these previous highs on the 9th of October and the low on the 10th of December. Here. So definitely these were still the same levels applied that I'd be looking at, and then looking down here as potential targets for price to fall if we continue to see this trend materialize. Now whether that happens today or not, we see this downside, I think ultimately there's, there's going to be a continuation of the decline in the NASDAQ for, for the kind of coming weeks, I should say. Whether that happens, as I said, intraday, who knows. But I definitely think that the market will find a bit— find itself a bit more comfortable with the notion of devaluation than some of these tech stocks once we've pared back some of the excessive rally, obviously, that we've seen over and above, well beyond that of the previous all-time high prior to the actual pandemic setting in. So perhaps definitely more for that, that kind of trade theme to run for the time being. Otherwise, that then led the, the handover to Asia in a relative negative state. And then we did see a similar type of selling pressure across the region. The CSI 300 index actually fell in excess of 3% until Chinese state-backed funds were said to have intervened to alleviate the declines in the stock market. Offshore investors, according to Bloomberg, are said to have purchased a net $514 million of Chinese shares via Hong Kong in the morning session, according to their data. Private funds also then re-entered the market, encouraged by the signs that Beijing was willing to kind of prop the market up after it had seen some heavy selling pressure. And that often is the case when we do see these fairly significant routes in that particular domestic market, it's not untoward to see the Chinese authorities be fairly proactive in looking to manage that. But as they were stating, you then start to see private funds following those trends, thinking that, look, in the short term, if they're going to backstop it, well, we can kind of ride the tailpipe of that and just follow the market back up then on the notion of that there's some real powerful forces underhand to, to help support this market. So that was overnight. Going into, you know, how it, how it kind of feels then for the European Open, equity futures have faded a little bit since that overnight kind of bounce and recovery. And I think they do still feel a little bit fragile here. Oil prices as well. So yesterday, after gapping up and pushing up to $68, we've, we've faded pretty fairly rapidly back down to around the 65 handle. We trade just beneath there at the moment. A little bit of an overnight recovery, but as I've said, with the equity story, oil the same, it's almost like the sentiment still is tipping on the more negative side for the time being. Now, why did we sell off so aggressively yesterday? Well, I think it's a combination of a couple of different things, to be quite honest. One was that, that assault on the storage tank farm at Rashtun terminal on Sunday in Saudi Arabia. Appeared to show no real signs of damage. I mean, it's one of the most well-guarded locations given its significance and importance for crude oil. And so it's— all of those missile drone attacks that it was under were all reportedly intercepted. And for the time being then, as much as the frequency of these events monitors strong vigilance to watch because of the nature of what a supply shock could mean for price overall. I think the market had a little bump up, got a bit excited, as I was kind of discussing yesterday's briefing, and then the move kind of fatigued as people realized that actually hasn't been any underlying disruption at that— at those facilities and infrastructure. That in combination, I think, with the fact that we've just had such a great run in oil I don't think it's too untoward to be seeing some short-term profit taking. And it was almost like the gap up and squeeze in the electronic trade open on Sunday night on Globex just gave reason at 68 to just book some of the trades, uh, on those short-term long positions, um, that might have been initiated even on the back of the OPEC surprise deal when they decided not to then bring that 1.5 million back online late last week. So I still think crude gets or sees a decent level of support if we do come lower down. We're in an area of some technical support, I'd say, in the short term, which is around $64.50 area. If we back down, then today I'd be keeping an eye on a bit lower down, $63.78 encapsulates those highs that we're seeing around the 24th, 25th. Of February and those and the supportive areas after the pop higher that we saw on the back of the OPEC meeting, which would be down here. So definitely think a bit of a pullback. How deep that pullback, that would be a good key area to watch, I think, today. But I still think that overall the fundamentals are there in place to keep oil supported, elevated, certainly up and around these levels, albeit just taking a little bit off the top for the time being. Another thing I just wanted to mention briefly was in the press was Italy. Um, I've talked about this a lot with the COVID-19 case divergence we're seeing with improvements in the likes of the UK and the US, but in mainland Europe, areas like Italy in particular have been seeing an increase in COVID-19 cases for some time. And what that's led to is Draghi's administration, advised by a panel of scientific and medical advisors, are now considering a hard lockdown for several regions while they look to further accelerate their vaccination rollout, as according to people who asked not to be identified but have— are close to the ongoing discussions of the government. So yeah, this again is one of those the base of the understanding that when it comes to things like European yield movement that's been kind of dragged up in the whole fanfare of the global yield move, that ultimately the exiting of the lockdown and reopening of the economy in Europe is going to be much slower than what we're most likely going to see in the likes of the UK and the US. And And likelihood you could well see a lot of that movement just fade. And we saw that yesterday with the ECB PEPP purchase updates, where generally speaking then a lot of people were looking for these signs that, you know, has the ECB drawn a line in the sand? Did they actively speed up the amount of bonds they're buying in that prior week? And it really wasn't the case. And so we do look for Christine Lagarde's press conference, obviously, for more direction when the ECB meeting takes place on Thursday. Thursday. The other thing then I think that's almost gone unspoken, but I definitely think it's on my radar for sure. And this came after we had a disastrous 7-year US auction. It was last week and it was just terrible. And the interesting thing here is, of course, is that with the amount of government spending happening at the moment, you know, bond issuance is at phenomenally high levels. And so the US needs to get these auctions away without, you know, with success in terms of appetite to buy into them. But from the market's point of view, it's, it's almost more important because what the market's got to undertake here is $120 billion worth of new bonds starts today. They're selling $58 billion in a 3-year note auction. They've got $38 billion in a 10-year. 24 billion in the 30-year for this week. The fear then is that one of these auctions performs just as badly as we saw in that recent 7-year, or even worse, and that triggers another round of selling in these related bonds. And then you see yields start rising, accelerating again quite quickly, and you almost set off the ignition, if you like, for a recommencement of a, of a key catalyst of fuel further yield rises. And if that does happen, then obviously we'd be looking for dollar strength, currency-based dollar pairs to weaken, gold might start coming under renewed pressure. And obviously we're still at these lower bound levels of recent trade, and then that's ultimately going to be another negative for the equity market. And particularly then that rotational play gets more fuel. So for me, it's almost like a, a domino effect here. And I do think that these auctions have the propensity, if particularly badly received, to be a— or to invoke a flare-up again of this yield upside movement. And that in itself then reverberates in that way that I just described. And particularly something like the NASDAQ could be susceptible for some more heavy selling pressure under those circumstances. So I'll share this FT article into the Discord room for Amplify Live subscribers, but I do suggest you, you have a read. Any questions about auctions, if you're a new trader and you're not really that sure about how does it all work and so on, just feel free to reach me in the chat. More than happy to help talk about that further offline. The other thing then is Bitcoin. I just want to mention this very briefly. As you guys know, I'm no crypto expert, but I just wanted to bring it up because from a price point of view, we've had a bit of a breakout of where we were trading on the 25th of Feb and the 3rd of March. Um, that was in the overnight Asia-Pac kind of commencement of the year, of the Asia session. So we've broken out and we've moved up toward the $55K level. That puts us back up to the highest levels we've traded since basically the 22nd of Feb, and the all-time high resides up here at just north of $58K. So So yeah, a bit of a breakout in Bitcoin, um, just seeing it just capturing a few of the headlines again as the price continues to move higher. Otherwise, in terms of the, the actual schedule for today, it's pretty quiet calendar. In fact, not a great deal coming out. The German data, just looking out for shortly as we go into the turn at 7 o'clock. And actually, just checking my news feed now, the German exports and the trade balance data has just come out. It's just gone through 7 AM now here in London, and it was 1.4%, expectations were for -1.2%. No real meaningful reaction though seen in European-based currency or assets. So just going back to the calendar, the morning is very quiet. Any European-based data on GDP and employment are final and revised figures for Q4. 4, so not expecting that to move markets. And then there's nothing major coming out of the US today until we get the API oil inventories, until after the market is kind of wrapped up for the day. And obviously the headline crude number was particularly elevated, and those inventory numbers were relatively discounted last week given the great freeze that we had over the period that it's capturing in that data. More recently in North America. Speaker-wise, there's a couple of interesting things. The Bank of England Chief Economist Andy Haldane speaking at 1. He does tend to be fairly vocal in terms of the MPC members as a whole. And then the other two speakers not until the overnight session. And then that 3-year note, $58 billion auction that I think Warren's watching. It's more so the 10-year auction for $38 billion on Wednesday perhaps that might be more interesting. But this one I think is a good litmus test to see how, um, the, the general market's appetite, uh, for these latest issues. And that's coming at 6 PM London. All right, that is it. So you're going to keep it nice and brief, let you guys get on with the day. And if anyone needs to speak to me directly, again, just reach me in the Discord room on Amplify Live, and I will see you tomorrow. Thanks very much.