This Week In Markets: 15th - 19th February 2021

Okay, very good evening to you. It is Sunday night, it's just gone through 9 PM on Valentine's Day, so I hope everyone's had a good weekend. And a happy birthday to Eddie Donmez, V-Day baby! So, uh, you've had a good weekend. But before I begin, I'm doing this on a Sunday purely because I'm going to be off the desk on Monday and Tuesday. I won't be back until Wednesday. The team will have you covered as per usual on Amplify Live. If you haven't checked out Amplify Live and you're part of our YouTube community, then absolutely do check this out. Uh, there's a free trial to it, our Trader Hub. It's got loads of fantastic, uh, kind of static learning content, but we have live video streams throughout every weekday and lots more content. I'm also doing a masterclass on Wednesday evening which is going to be myself. I'm going to be joined by a US trader, Merritt Black, who some of you might be aware of. He used to be the head of the futures desk at SMB Capital in New York, and so going to be great to have a chat with him and see what insights he can share with the community. So just check this out, AmplifyLive.com. Otherwise, look, let's get straight into it and have a quick look at the charts. Obviously still awaiting the market open, but there's a few charts I just quickly like to show you that I am keeping an eye on at the open, but generally throughout the week. It's going to be quite key. This one is WTI crude, and the reason why I'm quite keen to look at this is we finished exactly at around the level I've had marked up on these charts for, for months, basically. Actually, all of these horizontal lines are levels I put on the chart, um, literally back in December, I think. Just basing a lot of them off the previous price action when we started to drop lower through the, the main part of the pandemic at the beginning of 2020. And here we are, we're right back up to the 21st of Jan high. We pretty much closed there to the tick on Friday. This is kind of before really the whole epidemic in, in China was just picking up at that point in time. Before then, things really started to deteriorate thereafter. So key one here to watch for this week. Obviously $60 sitting just above this, and as you can see, there's not a great deal of technical resistance above here. So I do think if we get above $60, that then might act as a nice supporting board now for price then to kind of consolidate in the low $60 range, um, up to around $65, which would have been the year-to-date high of 2020 pre-pandemic. All of the main things still remain in play to watch, but overall the global kind of successful nature of vaccination programs accelerating, things looking fairly optimistic, albeit still vigilant for variant mutations going forward into the second half of the year. You've got stimulus talks which are still ongoing in the coming week, but then looking to be ratified forward in the coming weeks to come forward in the States. And then with OPEC+ still remaining supportive with their ongoing supply cut, at least throughout the next 6 weeks at least, before they'll likely tweak it again. So still positive kind of fundamentals, I would say, with the technicals. Again, as I said, it'd be interesting to see how we've fallen on 60 this week. So that's, that's one to have a look at. But yeah, US indices really just went hell for leather into the closing bell on Friday. I can see had a breakout here really right in the last half an hour trade on Wall Street, and we finished pretty much at all-time highs. And the futures here, we closed at 3935.75. So overall now, um, for equities, similar type of mindset I would say to what we've had of late. It's kind of any pullbacks to be bought into solid technical levels on the downside. I've read a few things at the weekend. It's the usual thing, it's kind of people saying the market's a bit frothy, Warren Buffett's got his kind of traditional stock market overbought signal flashing. I don't know, it doesn't really make me feel too threatened, uh, with the bullish view on equities. And that's not to say that, you know, markets can come down, for sure they can. But if you think about what we've seen over many different periods, and in fact, let's just quickly look at the S&P on the 90-minute because there was a chart I was looking at last week which I don't know if I still have it up at this point, but I haven't got it ready, so you have to forgive me. But here's a couple of, um, this is going back to January And here were some rectangles of when the market sold off, rallied back within hours, sold off, rallied back within literally the reopening of trade, sold off, reopening of trade. And then we had— remember last week we had that momentary sell-off? People were talking about a sell program going through the market, and that was quite a rapid sell-off that we saw, rebounded And then we broke out, and here we are now right above those levels. So yes, I think that there's scope for, um, some profit taking when you get up like that. You know, it's just the nature of the kind of progressive move up. But I definitely don't think we're— this week at least, barring anything unexpected, I don't think we're in for any that I can see foreseeable risks at the moment. Irrespective of the fact the calendar is pretty quiet. In terms of the weekend news then, just going to run you through some of the headlines to get you up to speed on a few things. And one of the things I like to do at the weekend is look at the IG Weekend Dow as an indicative kind of pricing then for how the electronic trade will reopen. And it's basically flat, which then already dictates to me that there's really not a great deal of weekend news going on. And I'm going to update you, there isn't. So the science kind of works itself out in that way. Um, important thing last week, it was pretty quiet. I remember one of the briefings I was kind of trying to convey, you know, is an important thing to do as a trader is to have confidence in your interpretation, in your news kind of dissemination, that if you get to the point where it seems pretty quiet, probably is. So you don't need to overthink it. Don't forget as well, this week you've got US Presidents' Day, so markets are closed on Monday, no trade on the NYSE. And then China's out all the way until the end of the week for Lunar New Year. So wrap that into the calendar. The calendar in terms of economic data and scheduled events is also very quiet Monday, Tuesday. So I think a good way on a Sunday, and a good, uh, definitely routine that I'm in, is that I generally like to put all of that together and start to visualize a bit of a hypothetical roadmap of what the week might look like, because then it just allows me to have some kind of foresight as to where the potential main interest, and therefore the main kind of pivot point of sentiment or market direction of that week, might transpire. And actually, Monday, Tuesday is very quiet. So unless there's any shock, unexpected event, I think the markets could be quite quiet Monday, Tuesday, and then things start to pick up with data, the FOMC minutes, and so on on Wednesday. And some other important data points coming later on in the week. Um, so let's just get up to speed and look at a couple of news stories. I'm going to kick off with the first one, which is this: UK Prime Minister spoke, um, late or earlier today, hailed a significant milestone. And the reason for that is the UK has recorded 15 million vaccinations against the coronavirus, meeting then that self-imposed government deadline by mid-Febr— so Great news. I mean, there's no denying it, the 4 key priority groups have been vaccinated now. And to give you some context, context, those 4 groups alone constituted for around 88% of deaths from the disease. So it was so critical to really get the dose administered to the elderly who are most vulnerable, the most at risk, in order to take some of the pressure as well off the infrastructure and things like the NHS. So a fantastic achievement. The government now— and this is kind of the next important things for markets going forward— is the timeline going to look ahead to. Now the government is due to announce a roadmap out of restrictions on February 22nd, and a key component of that roadmap going through into March, April, and beyond is the fact that the government plans to vaccinate another 17 million people by the end of April. Now, if they can achieve that, and it goes down this kind of category list, so we've had 1 to 4, then goes on 5, 6, 7, 8, 9, 10, and beyond. But basically, if they can do another 17 million people by the end of April in those most at-risk categories, that's going to cover 99% of those most at risk of dying of COVID-19. So that would obviously be a very good thing to happen. But also from a markets perspective, then all the more reason we can start then this phasing in of loosening of the recurrent state of restrictions. And so this is what the market's going to be looking out for on the 22nd. It's really quite key. The 15 million number that's come out the weekend is not a market mover in itself, so I wouldn't just blindly go buying into Sterling at the market open. That's not correct because we could have— the data, we could have derived a trajectory of 50 million probably 2 weeks ago. So that's not surprising, it's just a symbolic headline that's been achieved, which is obviously a very good thing in terms of dealing with a humanitarian crisis. What's important going forward now is going to be what does the restrictions being loosened look like and what is the timeline of that going forward. Um, otherwise then, um, one other thing I wanted to mention was Trump. Absolutely as expected, he got acquitted in the Senate. So markets weren't really interested in this anyway because it was pretty much a done deal that this was always going to happen. A few Republicans, 7 in fact, breaking ranks, but that's no great shakes. So Trump himself, as a character, as an individual, he's not out of the woods yet. He could still face criminal and civil proceedings. So yeah, before he can kind of probably release his new memoirs and his book and his new Netflix movie, he's got to wait a little bit because he's not quite out of the woods yet. But as far as Mark is concerned, this really isn't that important or that big a deal. The other thing then is Morgan Stanley, and the reason why their name has come up in the weekend press is because Counterpoint Global— now I'm not sure if you've heard of them, but they're a unit of Morgan Stanley Investment Management. And the reason why I'm talking about them, Bloomberg are writing about them, they're pretty big in the mutual fund space, but they've basically at the weekend said that they're exploring whether the cryptocurrency Bitcoin would be suitable option for its investors, according to people familiar with the matter. And obviously this is very timely because it comes after that news about Elon Musk's Tesla invested $1.5 billion into Bitcoin, and they were talking about taking payments in Bitcoin. And this whole kind of, is it a treasury asset in terms of crypto, um, for a lot of these other corporate treasuries to invest in. So Bitcoin has risen over the weekend. I only have futures pricing, so I can't show you the current price, but I can show you what was the price pattern we had last week. And obviously prices rocketed higher on the back of that initial Tesla news. We actually rallied from around sub-$40K up to $49K. So you're talking about 25% overall in that move. We then really never saw that much of a pullback, kind of consolidated between 46.5 and 49. And so, you know, 50 is obviously the near-term big target here. Do we break 50? I would put a gun to my head, I say yes. If we break 50, I think we go 55, probably quite rapid pace, maybe even higher. Why not when it comes to Bitcoin. But if we did, obviously the harder it rallies, the harder it will fall. And I do think Bitcoin is in need of a, of a retracement in size, particularly if it does break out when it goes through 50. So something I'll just be mindful of going forward if you're looking at it. But yeah, more vindication, if you like, in the short term for the kind of Bitcoin enthusiasts and the crypto players. But let's just take a look at the calendar. What have we got? Well, as I said, for the, for the beginning of the week, it's pretty quiet. So I think just keep that in mind in terms of the way that you're looking to trade those sessions. Could well be the fact that it'll be a more technically driven session. Definitely Monday with the US and large parts of Asia out of the market, things will probably be very quiet. Excuse me. Otherwise, let's just jump to Wednesday and talk about some of the main US data that's coming out this week. And you've got retail sales and industrial production. Now these are both January readings, and both should show the US economy started 2021 on a fairly firm footing. In fact, for the retail sales number, should see a bit of a bump because it was in early Jan when some of those, those previous stimulus checks were being issued. I think it was $600, and that should then translate into a bit of a pickup there in that figure. So definitely those two numbers are keeping on. And then later on that evening, you've got the FOMC minutes. Now they do carry a slight risk of upset in the bond market should a few members, um, want to discuss the appropriate timing of the withdrawal of stimulus. So you remember, um, prior to the last Fed meeting, there was a couple of speakers that started talking about tapering. Then everyone got mega sensitive to the word tapering. Yields started moving, the curve steepening, um, people started a combination of that in step with this whole reflation idea because of the amount of stimulus that's coming in. But we saw Powell himself and pretty much every other then FOMC member come out and push back against that idea, and it was definitely much more of a status quo in terms of the actual meeting in itself when it transpired. So definitely there's a, there's a little bit of risk with the meeting, and the risk being, is there any of them, or was there any type of discussion about having a discussion about withdrawing of stimulus, i.e., quantitative easing? If there was, that could be quite a bullish reaction you might see in markets. And if that did happen, you'd be looking at yield, continuation of yield movement higher, equities perhaps coming under a little bit of pressure, particularly these elevated levels on the fear of tightening policy in the future. And the dollar might see a bit of a kick on the upside and start to push on, which might weigh on those major currency pairs. So I'd say that's probably lesser likely than likely to happen. But definitely that's the type of reaction then that could be quite severe in a hawkish way if there was some intonation, there are some conversations going on at an early phase about withdrawing stimulus. So yeah, those minutes will be quite interesting. Sticking with Wednesday, you've got UK inflation data, and then jump to Friday, you've got UK retail sales and also manufacturing and service PMIs from the UK. Now, all these figures are for January, which in the UK, of course, we're in the midst of a lockdown. So that might mean for pretty gloomy reading in terms of what the economic picture looks like in the UK. These are traditionally tier 1 economic data points, so typically important and normally market-moving. However, even as gloomy as they might come across, I really don't think they're that important because ultimately what is important is markets are forward-looking. And at the moment, the way the vaccination program is performing and accelerating at this point, I think the markets are still taking that more optimistic view about how quickly it will come that the economy can start reopening its doors and what the second half of the year will look like when things start to pick up again. So kind of a bad few weeks in the past is outweighed by a more optimism about what the future looks like. That's how I would perceive it. Otherwise, in the eurozone, a few things. On Thursday, we actually get the ECB minutes. So you've got the Fed minutes on Wednesday, ECB minutes on, on Thursday. They should pass without much incident. I'm not really looking too much from that. Actually, what from the eurozone is probably going to be much more important is the flash latest manufacturing service PMIs Germany and France coming out on Friday morning. So as always with those data points, I would be particularly vigilant to be, to be watching all European assets out of any kind of intraday positions, just waiting for that data to hit. Um, overall, obviously the vaccination program very different in terms of its deployment in mainland Europe compared to the UK. They're a little bit further behind. They've had quite a few problems in terms of acquiring the vaccines to then implement them, given the composition of the different pharmaceutical companies that they're using. And so with a lot of strict lockdowns still in place, um, probably tipped on the consensus estimate to be slightly more pessimistic with these numbers overall. Then the last thing— it's not on here as a calendar event, but I'm sure it's something which a lot of people in the media are going to be focusing on. It's on Thursday, and that's because Citadel's Ken Griffin, Robinhood CEO Tenev will testify at the House Financial Services Committee hearing. And this is, of course, as they've been brought in to talk about what happened with GameStop and other related stocks. Also, there's going to be Melvin Capital Management's chief, Reddit co-founder Huffman, and Keith Gill, one of the key Reddit users behind a lot of these kind of flaring up of the kind of interest in these particular types of names. So yeah, definitely popcorn at the ready. Those politicians are going to let loose, and I'm sure they're going to give those guys an incredibly hard time. But from a market's point of view, it's really not important. It's just more for entertainment watching rather than anything else. But yeah, look, that's it. Gonna let you guys get on with and enjoy the rest of your Sunday evening. As I said, I'm not at the desk Monday, Tuesday. I'll be back Wednesday though, but all the rest of the team are there on Amplify Live first thing Monday, ready to, to get things going. All right, take care and I'll see you later in the week.