Tip Of The Iceberg Or Peak Virus

Good morning, Monday the 10th of February. I hope everyone in the UK made it through the, the stormy weekend, but back to business Monday morning. A look ahead for the, the week, not just the session ahead, and what have we got. So normal routine, I'll talk about some of the, the key fundamental themes that are going to be in focus, at least from our point of view, and then I'll hand you over to Sam who will go over the charts, both intraday for the week from a technical perspective. And if you're watching this on YouTube, don't forget to subscribe to the channel. We'll be doing these updates throughout the week. So this is the, the calendar of main events, but before I jump into that and discuss a couple of key points of interest, let's just have a quick cross-check on still the subject which is dominating a lot of the kind of national mainstream as well as financial media, and that is the the ongoing situation in mainland China and the coronavirus. So here is the live, uh, Johns Hopkins mapping data. And so total confirmed cases now just over 40,000, and the deaths tally now at 910. So does indeed now eclipse that of the SARS virus in 2002-2003. Total recovered numbers being reported around 3,000 400. Now, a couple of interesting things that have developed on the back of this, which has drawn a few headlines this morning. For one, this was the, uh, basically the head, the Director-General of the World Health Organization, uh, came out and made some comments, um, from overnight. So let me just go back onto his Twitter account. So obviously, just like the way other senior or influential people these days communicate to markets is via their Twitter account, and the World Health Organization no different. So there's one particular comment— I did have it up, let me just see if I can find it quickly— but he was basically making a reference to this being the tip of the iceberg potentially, just in terms of the actual numbers in regards to the ongoing coronavirus. And that obviously coming from someone of that stature and related to the ongoing monitoring of this, has seen a little bit of attention, bit of a blip down at the reopening of trade. However, when you actually look at the charts this morning, you can see that we've seen a pretty decent recovery after that initial opening price. So once again, I do feel like the media fanfare around this is still in full swing. However, from a market perspective, it's still a lot more rational in response in that respect. And I think that is, you know, what we're seeing on the charts in front of us at the moment. A few other things over the weekend that probably warrant a mention though on this point. One is a lot of studies coming out now apparently about the— when can we get— when will we see peak virus as to then ascertain when can almost China go back to, to business as usual. And mid to late February seems to be the most common kind of timeframe. There are other mixed reports saying that the coronavirus may infect up to around half a million people in the end at that point. However, on the flip side, the executive director of the World Health Organization's Health Emergencies Program did also say that there had been a stabilization in the number of cases reported from Hubei. If you remember, that is the area specifically which encapsulates then, uh, the apparent origination in the city of Wuhan. And they have seen in the data a 4-day stable period where the number of reported cases has not advanced. So that's per the graphic I'm just showing you at the moment. So this is the kind of thing that they're looking for, is this just general natural leveling off as those who have the immunity to it and have recovered then, and with the containment of locking down the city for the period that they have done for now, coming up to what, almost 2 weeks or so, do we start to see a leveling off in that respect. A couple of other things A few people mentioning the fact that some Chinese factory, uh, kind of blue-collared workers returning to their posts today. One was Foxconn, which is particularly important because obviously that has kind of a chain effect into large US corporations like Apple, for example. But one of the things here from a white-collar perspective, many being asked to work from home and they're still various different differences to the, the different provinces, if you like, in China as to their proximity and number of reported cases and whether or not it is a full return to work as yet. But this obviously is quite key because the longer that they remain on, on full lockdown, the more severe the implication on their economic activity. However, if you put them back to work and it's seen as too premature then obviously that could then reignite then the transmission from human-to-human cases because people are then able to spread the disease or outbreak more effectively. And so yes, quite, it's quite an interesting time for it, whether or not we start to see the next escalation of it or we remain as we are at the moment. I think at the moment markets remain fairly sanguine, and, and I think that's the way you've got to look at this. Almost kind of objectify the situation, try not to get too caught in the conspiracy theories circling on Twitter, and just focus on what it is that's moving charts at the moment. And I still try to look at this type of thing as binary as possible. And unless the outbreak numbers start to manifest themselves, a, outside of China, and And B, once they do start to return to work, if that starts to see another new exponential rise in number of cases, meaning that they're going to have to reclose a number of significant populous areas of the country, which is going to have big economic impact on the country. Now, unless that unfolds, I still don't think that this is a particularly massive issue for markets. Not to say that that could change in the future, but that's the current status quo, I'd say. The other thing that few people have looked at is overnight, you know, some inflation data out of China. I don't think it comes as a massive surprise. Chinese consumer inflation hit its highest level in more than 8 years in January due to the impact of the virus outbreak and the Lunar New Year. So normally we do see a seasonal blip given the complete country shutdown for the Lunar New Year, but given the extension of that with the virus meant that consumer prices in China climbed 5.4% in January from a year earlier, the highest reading since October of 2011. Food prices grew 20.6% from a year earlier. Pork prices were up 116% on the year in January, because remember, before this, food prices were already elevated on the back of the, um, the swine flu that was creating a cull on a large scale of pigs, which saw a big boost in those prices for a while. So it's almost exacerbated of what was already an ongoing inflationary issue in terms of the divide between, uh, divergence of CPI and PPI in that extent. So that will likely continue for now. Some other headlines to cycle you through, then a few thoughts on the week, on the calendar. We did have Irish elections at the weekend. You've probably read a little bit about this. The main thing here that I want to stress is that this isn't— this doesn't have any immediate market implications, at least not for now. But what has happened is Sinn Féin ballot box revolution rocks the Irish establishment. So what otherwise is very much a two-party system, kind of like in most countries if you think about it, Britain the same, you know, if you had the Labour and Conservatives, but you know, both parties almost diminishing in their, their interest had been for the recent few years a bit of a pattern until Boris obviously got this commanding majority. And that has led to things like populism, Brexit Party, or even a brief stint for some other parties on the more kind of pro-European Liberal Democrat side saw some popularity at one point. But the, you know, a common thing that's been seen and continuation of that in Ireland. So Sinn Féin, which does draw some eyebrows given its historical connections to the IRA and left-wing policies, the Nationalist Party now will now go into potentially coalition talks. That's not to say that they're going to have the outright control here. Both parties, both the existing main established parties, argue Sinn Féin's mix of nationalism and populism are unsuitable for office. So both had previously said they'd be unwilling to go into any type of cooperation or coalition government with them. However, Fianna Fáil's Michael Martin accepting his obligation to find a functioning government could well break that, that traditional mold. One of the main things here is, you know, why, why has populism been, you know, nationalism such a prevalent theme of late? Well, Brexit is a particularly striking issue, of course, when it comes to Ireland in particular, and that, of course, has had some implications here. But other familiar policies—taxing the wealthy, lowering retirement age biggest spending program in decades on housing, have all been very popular things of a country which, don't forget, was the recipient of a sovereign bailout only within the last decade as well, and has gone through a strong period of austerity, then Brexit. I don't think it's much of a surprise to see a more national party coming through and being more popular in this current economic or political climate. Going back though to the, the calendar for the week, one thing that I just wanted to mention here was we continue to monitor for any ongoing comments out of OPEC+. Will they or won't they cut supply? Oil, I'll leave from a technical point of view for Sam to look at, but it's trading back basically at a $50 handle, so still threatening quite a key significant point. And one thing that I thought was interesting from what I was reading at the weekend was at the moment you've got a bit of a standoff. The Saudis want to act, but Russia not so sure on the timing and haven't really made any firm commitment either way as yet. But one thing that was happening over the weekend was a, a meeting in Cairo, and this was peace talks that were happening. Now, Libya— this is in respect to Libya specifically. Now, Libya in the last few weeks, as per this graphic that you can see, this is looking at the access from left to right, the last 10 years of Libyan crude production. Now, the country's crude production, if operating at close to maximum capacity, can be pumping kind of up at 1.6 million. However, at the moment they're pumping just 200,000. So it's one of the lowest rates that they've pumped, as you can see here. Since going back 8 years ago, essentially. Now, why is that happening? Well, civil unrest is the main thing, ongoing conflict between the internationally-backed Tripoli government and General Khalifa Haftar, which has caused huge disruption to their ability to produce oil. However, these peace talks have been happening at the weekend, and one thing that a few people were talking about that I was reading was that if they can de-escalate this ongoing conflict in Libya, and that can lead back to more stable, calm conditions so that production rates can return back to some degree of normality. If you looked at where we were on an average kind of price over 2019 trading or producing, it was about 1.2 million. So if you think about it, over the coming period then, and you can see these rates can change fairly rapidly, What if Libya starts to bring about 1 million barrels of crude oil back on the market? Now we're talking about oil price which has been whacked by 25% on the back of the consumption loss out of China impacted by the outbreak of the virus, as we know, and prices have fallen down to this $50 handle. The key thing I'm looking at here then is Actually, Libya might hold the key because if I flip over here— I know this is a bit— I'll share with you the blog here so you can have a look at this in more detail. Did send it out to everyone this morning. But here, this is looking at oil over the last kind of 2 years, and one of the things that I'm looking at is last week we broke quite a key level of support just above $50, which held a lot of the price action through the best part of 2019. Uh, we did briefly break that. However, when OPEC in their technical meetings last week started making some noises in toward cutting potentially the recommendation 600,000 barrels per day, um, we, we started to see a little bit of stabilization in prices, but we're right back teetering on that level again. And I think if we do break it, then that does open kind of technically a bit of a trapdoor, and we start seeing prices down at $47.50, $45, and that starts to bring in then that end of Q4 2018 low. Now the trigger point for this is at the moment OPEC seem a little reluctant to pull the trigger, and we talked about this last week in terms of their strategy. They were kind of trying to verbally intervene last week. They haven't yet got to the point of actually cutting deeper supply. I don't think that they will unless we get that run down into the mid-40s. So if you start to see headlines pertaining to Libya having some type of peace agreement and then tracking their numbers going north as they normalize their production rates, I think that could be just the tipping point then to add to this current bearish dynamic that we've got fundamentally in oil. And with a technical breach at these levels, that could be the key then for the move to the downside. So something to just look out for this week. Going back to the, the calendar Um, as you can see, for today it's pretty quiet overall, uh, but Tuesday things start to get a bit more interesting. We've got UK GDP, of course, people will be watching closely, uh, just given how some of the other economic data has performed since the, uh, initial election bounce, if you like, that we've had in some indicators. Um, but we get the first of a two-day significant platform for the Fed Chair. So anyone new to markets the Fed Chairman Jerome Powell testifies before the House Financial Committee on Tuesday and then to the Senate Banking Committee on Wednesday. And the event in itself historically has often been seen as a significant staging post for the, the head of the Fed to say about what they feel about current economic conditions and also future policy decisions. Now, the two events are basically a copy-paste repeat of each other. So by default, then, the Tuesday one, when he says it for the first time in terms of his opening statement, which will be already known by the major accredited press— so you'll get that whole batch of headlines hit the news wires on Tuesday afternoon— um, that will be the most important one. And one of the key things, of course, will be does he add any more color as to the impacts of the, the virus on the overall global perspective of, of where we're heading in the future. Um, going further forward then, other things we're looking out for— you've got ECB's Christine Lagarde, uh, the president, speaking on Tuesday, uh, in European Parliament. And that does come ahead of Friday, which is going to be a key day for European data, because for the second quarter in three the German economy is expected to be in contraction. And this will also then see the preliminary eurozone GDP figure as well. So that's on Friday. Now, from other data points of interest, really on— back on Friday again, you've got US retail sales, industrial manufacturing production, and Michigan consumer sentiment, the preliminary reading, all also happening, um, on Friday. From an earnings perspective, what do we have? Well, actually, I'd say earnings starts to almost completely drop off the main macro radar. I mean, for single stock traders, obviously still important. We're about 64% the way through of the S&P 500 reporting so far, but all of the big boys are kind of out of the way now. Uh, 65 companies will be reporting this week, but as you can see, here is a glance of some of the most anticipated earning releases. Some of the biggest ones, I guess, from an index weighting point of view— Alibaba Group, PepsiCo, Kraft— might be ones of interest. From a UK perspective, on Friday I think you've got Astra and RBS, and you've got also Daimler, which were in the press this morning. The German automotive name, I think they report on Tuesday pre-market, so tomorrow morning. There was a headline out of the Handelsblatt this this morning they're cutting 15,000 jobs as part of a cost-cutting exercise. Remember, they've issued multiple profit warnings last year, so they look to kind of tighten the belt in that respect. So yeah, that's, that's the overall kind of landscape for the week from my side. So I'm gonna use my, my, uh, safe word with Sam to know that he needs to swap now for him to come on, which is pineapples. And I'm gonna leave you with that. So overall, a little bit of getting the week underway with a focus on the coronavirus. I honestly still don't think that that is a major issue at this point for markets. Again, it's kind of one of those things where Monday— there's not a lot coming out on Monday, and also you get this kind of media fest over the weekend, and because markets are closed close. You have a little bit of a gap down, but we've already recovered that. So it's something to monitor, um, as we go through the week. But otherwise, you've got Fed's Powell's testimony. Keep an eye on oil. I think that could be a real interesting one this week, just given where we're trading at the moment. And then Christine Lagarde and some data points on Friday to look out for. Okay guys, thanks very much.

Thanks, Anthony. Yeah, oil I think will certainly be an interesting one this week. If we just have a quick look where we're looking, where we're trading at the moment, just literally a couple of cents below $50 on the futures. Bring in last week into picture, and if this is all you can see, it's, I would say, pretty hard to form a picture of what's going to happen. Pretty range-bound, doesn't it? If you look back on the beginning of last Monday the 3rd, we, we basically hit that a couple of times along with some Friday before that resistance. And those lows have, have come in and held quite well as well. So, uh, you would perhaps favor, you know, from what we're seeing this morning, and move down to the lows of last week. But overall, it's going to be probably dictated from, from OPEC and, and other comments that come through from that. Having a, a bit of a look, lower time frame into that. Let's get the 15-minute in. Uh, what could we have for, for entries? I guess you can see from— let's just bring this trend line on— from, uh, yesterday, or Friday I should say, uh, afternoon, early morning, then the afternoon, then this, this this early session today near the high. You've got a nice trend line in the mix there, 3 touches, so a break of that might give you a bit of confidence that this move could push on and towards the pivot. Obviously looks like a pretty key point as well, so that trend could be a bit of a guide to, to the upside. To the downside, well, actually the level we just broke through here, 50.09, uh, I know it's probably not the right time to be looking to trade oil, uh, given the time and also the day, uh, but that could be a bit of a short, shorter-term resistance. And then obviously below, you're looking at the, uh, the lower point we got to today, $49.56, which is basically the, the low that we had from the year so far. And as we also know, if we do push lower, time to, to get on those, uh, longer time frames and, and have a look at levels not seen since 2018 when oil was just recovering a touch. But The next really, really key level for, for me that I like the look of, uh, I would have around 4807. It was the low that we had on the futures anyway, the 7th of Jan. And, and just below there you've got, uh, the high, uh, 4777 from the, uh, what's that, the, the 2nd of Jan as well. So that's some key support for me where, uh, to be honest, medium term, little long I don't think would be the worst idea in the world. Having a quick look elsewhere, uh, European Open, 8 o'clock. Let's have a quick look at the DAX. Choppy to start the week, perhaps a bit undecided. Uh, worth keeping, uh, I would say, a watch on that previous resistance that we did break through, uh, around 1:30. So keep an eye on that, 13,450 give or take. Also got a similar, uh, trends to how oil was set up, that we've got levels from Friday. This just happens to be in the afternoon, just guiding price down. So if you are bullish on stocks, uh, a push above those trends and the pivot could be the, the way to look at this. If we were to, to hold up around there, quite a lot of support below, of course, where we have been trading this morning. And you can see any of these previous highs would certainly be ones to, to keep an eye on. That low that we had early hours this morning was also support back on the 5th as well. So some key levels to, to be aware of. Line in the sand perhaps guiding price, um, well, it's been guiding price higher, you'd say. Could well be these highs that we had on the 29th, 30th. We broke through just, uh, last week, and then just above the, the S2, 13,373. Uh, decent price action around around that area, a bit of a line in the sand for the bulls to defend and the bears to want to take over. A break of that and then you'd be looking to, to target back down towards the 4th, 5th area where of course the vaccine, uh, the cure, uh, was released. S&P and the Dow and the NASDAQ, let's have a quick look as well. You can see it's gonna bring the Dow in and this was a level I was looking to get long Friday afternoon And of course it happens in the, the early hours of Sunday night, Monday morning, and bounces 100 and the rest points. But, uh, you know, we move. Let's have a quick look in more intraday. You can see it's again the trend from Friday. That's just guiding price. It's not necessarily the most perfect trend line as of yet, but if I was bullish, I want that to break and I want to see a nice push, ideally in the afternoon. For that to take place. $29,000, uh, the psychological handle. Decent price action there Friday, already just tested it now. So for a bit of support, uh, in line in the sand, that's as good as any. A break of the low that we see today, and then I'll be looking down to the, the cure, uh, around $28,756. Since then has been on a bit of a downward spiral after peaking in the early hours of Thursday. But again, you can see this trend. We had a little false break around 1:30 on Friday after, uh, non-farm payrolls. But just have a quick look here as an area you would want to see to break if you're overall bullish. So to the upside, you've got the little trend line that we're in here, uh, and then around 29,185, uh, would be pretty key, uh, for me to, to want to to see break if I'm going to get long. The pound this morning just drifted lower. Poor week last week. I'm going to look on the 2-hour. You can see pretty much from the, the off, you had those comments over, over the weekend from, from Boris, which really dampened, uh, the, uh, the mood for pound bulls. And we're, of course, now let's get that daily chart out. We closed the week below some of the key support which had been guiding price. You can you can see here, nice break below. We, uh, perhaps now looking to extend it down towards 128. That's an area I'd be looking for. Not the biggest move to start the day, but when you— when the volume starts to look to come back in, you know, that's a move where you could be targeting down to that 128 handle. If you're bullish, the old false break push above 129.39 is, is an option. However, I wouldn't be too sure that that's a going to take place just yet. So pound, I think, certainly to begin the week anyway, uh, would be favoring a move to the downside. Euro, um, well, let's have a quick look. You definitely want to have some of these, uh, longer-term horizontal— what was support, now resistance levels— on. You can see the amount of times we tested it: October, November, and then again here on the future. So keep a watch on that should we come back to test it. If not, then you are looking at those lows from last year, uh, as well. So the euro under a bit of pressure. Let's have a look now on that 60-minute just to identify some of these areas that I would look to have on if we were to just recover a touch. R1 looks very key, not just intraday but going forward as well. You've got the high there from Friday afternoon, and of course that longer-term support level as well. Pivot has acted as a bit of, uh, resistance as it did so many times last week. You can see early hours Friday almost hitting it, Thursday the same, Wednesday, Tuesday, and then on the break of that on Monday. So it's a good guide for the price, uh, if we were to come up there again. Just keep a watch on that and how it trades. If you're looking for that continuation, of course the break of, of Friday's lows is another option, uh, of that. I would still be looking overall to get short. We're going keeping an eye on the dollar as well, of course, which is, uh, at levels not seen for quite some time. Aussie dollar, let's have a quick look. Of course, that broke, um, some key, uh, support last week, having had a decent bounce from a similar level. So keep a watch on that. We did close on the futures below those levels from August last year, and as we put this on the longer time frame, if we are to continue lower— well, let me just remove the pivots just to show you where the next level of support could be. And you're looking down near the financial crisis of 2008, and really I'd say the next technical level, the high of the week of the 9th of March 2009 at, uh, 6605. Whether that's a target you want to get in right now or not, I'm not too sure. But let's have a look at the 60-minute just to, to hold some of these levels in with the pivots. You can see Well, we're just testing that pivot now. I guess early hours, probably waiting for the break of that to continue to go short. First test of it after breaking through, uh, it's holding up the zone. Of course, have not broken there. So, you know, the pivot was to break, close below, targeting, uh, the lows of Friday. And well, I don't necessarily think we get the 6605 level today, but as your line in the sand goes, if we were to close even, I guess, an hourly. Again, below all this area of support, you've got to be a seller in my book. Just a word of warning, if it does push lower, just be aware there could of course be this trend line that comes in to play around there as well. Have a quick look at gold just to finish it up. Starting the week positive, drifting lower, um, as Asian stocks just recovered initially. Keep a watch on— see, on that high of the, the day, it was also a level back on Tuesday morning, similar time. So keep a point marked up for that. We did have, of course, the, the break lower yesterday— last week, I should say— for gold. And just bringing in that trend line here that broke through, you can see we, we tested it all through what would have been Thursday, Friday, spiked after there on the non-farm payrolls, the, the jobs report. And, and really, that's a trendline I would be looking to move, and just identifying a couple new ones near those bottoms from, uh, the 5th. You can see you've got your 1, 2, 3 tests. So if you're bearish, just wait for that to break, uh, and I would say this R1 is a good line in the sand, uh, as you will need. And if that is to push on and break through, the highs of the 3rd, etc., uh, are where you'd be looking for, uh, just be keeping an eye on, on stocks here, uh, which have just touched lower a bit. And obviously with oil going down, stocks going down, your safe havens just catching a bit as well. Could see a little flurry through to start the week. But, you know, Monday, not expecting, you know, necessarily fireworks on the, the calendar highlights front. It's, along with Thursday, the probably the quietest day. So just, uh, just be careful out there, you know. Want those confirmations, uh, bigger things to, to come this week. Hope you all have a good one. Speaking of that, and any questions, please do let us know, uh, and I'll catch you all later on.