Trading Guide: Morning Routine & How To Read The News

Okay, very good morning guys. Thursday the 11th of February. Hope everyone is doing well. I just wanted to quickly mention our new podcast, The Market Watch, which we officially launched this week. We've actually made it into the top 10 of the Apple Podcast chart for investing. So just wanted to give a huge thanks to, to the community. You know, one thing that I'm you know, super happy to have. It's such an engaging, such a supportive community that follow Amplify. So honestly, I can't thank everyone enough. Had some really great feedback and comments about the podcast, and, you know, we've managed to beat out some of the likes of the BBC, Motley Fool, Bloomberg, and some of the other ones. So kind of feels good to stick it to the suits. So to speak. And we did it without mentioning really Bitcoin or the word billionaire. So yeah, thank you, thank you very much. And you know, one of the main things is my job, as a lot of you will know, is to aggregate news. I've worked in that kind of space for almost 15 years now. And you know, I hope that the podcast is not only informative but delivered in a way that's not just vanilla like what you hear with a lot of financial news, which is quite frankly quite boring. So hopefully Hopefully the more informal style at the end of the week is something that you enjoy. If you've not listened, please do check it out. It'd be amazing, of course, if we could get up to the top 3. So again, it's on Apple, it's on Spotify, it's on all the major platforms. If you've not already done so, please, please give it a follow. If you like it, rate it and leave a comment. That would be awesome. But let's get straight to it, enough of that, and let's look at the charts and what's going on. And actually, a particularly quiet open, I would say. And actually talking about what's going on isn't going to take me too much time at all. And a really important lesson here, I think, for any new traders definitely was something I was taught very early in my career, which was whenever there is You know, you do— people have like a morning routine, right? I mean, I'm like pretty much rigid like a machine in my morning routine. I get up at this time, I do my coffee this way, you know, I put my clothes on this way, I turn on my computers and set up my screens this way. You know, I think a lot of people are like that because of the nature of— generally, if you're looking at markets, you're up pretty early and time is often of the essence in the morning to get ready and catch a lot of those opening UK, European kind of moves. But the point I want to say was that actually I think a lot of new traders often will do that prep work before the market open, and if it is quiet, they'll think almost that they've done something wrong or they've missed something, or, you know, just, just they don't feel comfortable with the fact that actually when they look at their morning prep and it's like there's nothing going on. But one thing I always used to say to the junior analysts I used to kind of mentor in my previous role was that, look, if there's nothing going on, then there's nothing going on. Why are you talking? And so sometimes, you know, you've got to, you've got to provide value in the terms of that, that squawk communication that I was doing to clients. And, you know, if there is nothing to say, there's nothing to say. And so from a news perspective, it's really not going to take me long at all to get you up to speed of what's going on. There was a couple of comments out of Powell. We can talk about a headline figure about COVID And then just looking ahead to the day, of which the calendar is pretty much empty anyway. And of course, now we're into the Lunar New Year holiday in the Far East, which means that there's pretty much mass closures across Asia. So that as well lends its hand to generally quiet overnight trade. So yeah, just something to be aware of, you know, to have, have the ability or confidence to, to realize that there's not a lot going on. And that's fine. You know, in terms of the market movement across asset classes this morning, it's equally quite quiet. There's nothing really noteworthy. I just had a quick scan before I came on of the charts from a technical perspective, and there really isn't anything that jumps out to me that's particularly interesting this morning either on that side of things. So the DXY is trading flat. Both major pairs reflect that, basically unchanged. US index futures flat to very minor positive. T-notes unchanged. Uh, in, in the commodity space Gold just moving up a touch, um, but down only $4. So not, not a particularly busy session overnight. As I said, Asia out on the market holiday for Lunar New Year. And then crude markets just stuck within a bit of a range at the moment after finding a bit of resistance around pivot in the overnight session, trading down $0.36. But again, that move, it's nothing really. Um, so yeah, very, very quiet markets overall. But one thing I did want to mention, it was the move that we saw in equity markets yesterday. I was actually caught up delivering to a couple of different business schools yesterday, so I wasn't able to follow markets completely, but I did have that one little window where I saw— I always have TweetDeck and things and a Squawk playing in my office at home, and I could hear people kind of panicking about a sell-off that was happening in the US equity market yesterday. And it wasn't so much tied to CPI. You know, the move happened well after that. And a couple of things I just wanted to point out when you see a move like that. So I was kind of conveying it to the people in our community on our Discord channel yesterday, which was it's often the case that, you know, when there is quite a quick and significant move, particularly like we saw yesterday, people will start going, you know, what's the headline? Why is it happening? And I understand that a trader's got to have some sort of degree of clarity and visibility in order to give them confidence and conviction in what decision to make. But the point there is a couple things. One, I would look at the composition of the candlesticks. You know, if a headline has hit and it is significant, then there should be an immediate pronounced impact on a very short time frame. So a 1-minute candlestick bar, for example. If it's more of a pent-up move over several minutes, then it's probably less so just a one-hit wonder kind of headline that's created that move. And often it's more— again, second thing, look at the chart technically. Is there any significant levels intraday, longer term, that have broken? And then does that then in itself lead to some stops being run and then some momentum short money moves coming in, fast money moves hitting the market, just following that trend down. And then thirdly, yesterday, you know, think about the assets market positioning. You know, we'd gone through a period of 6 consecutive up days, um, in US equities. The prior day we finished basically flat. I don't think you could really call it snapping that streak, so let's call it 7 days. So a little bit coming off the top is not unusual. And then again, when you listen to Squawk or you're looking at Twitter or headline feed and there's no news, then to me, when I put all of those pieces of the puzzle together, the final element is kind of what's the cross-asset class mix. You know, if this was genuinely a fundamental development, well then T-notes yields should be moving, gold should be moving, the currency market should be moving. So an isolated move like what we saw yesterday just to me lends its hand to mainly order flow. And often then you get these kind of sell programs that might be a liquidation of position, an unwind, some profit taking on a larger scale from a larger fund given the run-up that we've had in equities to all-time highs. And then at that point it's about, well, okay, how do you approach that? And I guess there's a couple of different ways. There's, you know, it's very hard then to get hold of the kind of downward move. I think that probably lends its hand to the more proactive, assertive type of character trader who likes that fast money move. Overall, that's not— definitely not for everyone. Uh, definitely in more of a retail capacity, if you're swing trading, things like that, you should definitely stay out of that type of move. 'cause it's obviously very rapid. If you are going to short a market like that, you've literally got to be thinking very short timeframes. What's the first, clearest, nearest point of exit? Manage that trade very proactively. I think trying to pick the bottom, thinking that, well, this is a mispricing, because technically if it's an unwinding of position, the important thing here, this goes on to the final point, is that ultimately the trend is not broken. This market is moving higher. And that whole kind of buy the dip mentality probably remains true because all of those supporting factors for buying the dip remain in place, i.e., stimulus is coming, the Fed remain, uh, accommodative. That was ratified by, again, Powell last night. You've got earnings were very good, the virus is moving lower, so equities should consolidate, if not continue to grind up. But, you know, the move to 3,900 S&P, 4,000 S&P, 4,500 in the S&P, you know, I do think we'll get there, but that doesn't not come without moments like yesterday. So trying to pick the exact bottom, bottom, I think is very difficult in terms of in the moment. But that doesn't mean then that I think you should still have the understanding of the fact that, look, I was looking on a 60-minute chart here yesterday to make this point to some of our new traders yesterday, and I had it marked up here. I just went back, and this is only looking at the last 3 weeks, and I just wanted to show them episodes of when the market sold off, what happened next. Market sells off, what happens next? Again, copy, paste, repeat. The market comes down, the, the spring back is pretty solid. Now, can that trend, you know, can buying the dip be broken? Well, absolutely it can. There needs to be— then there does need to be a headline fundamental reason for that. And when there isn't, and it's a flow unwind of a trade or position like what we saw reportedly yesterday, well then this market's just gonna move back up again. So yeah, I think there's a couple of good lessons there from, from that price activity yesterday, because I can almost sense a little bit of panic, and particularly on Twitter, people going a bit stir-crazy about that. And I think it was quite unwarranted. And really, this is when I guess experience in some way comes to the fore, because I've seen this hundreds of times before. But hopefully that explanation gives you a degree of how I would approach that type of thing. But look, it's very quick otherwise for the briefing. As I said, there's not really any charts that I think warrant me showing you from a technical perspective. So let me just run you through a few headlines. Jerome Powell spoke at the New York Economic Club, one of those kind of keynote speeches that he gives throughout the year. And Powell said the US job market remains a long way from full recovery and called on both lawmakers and private sectors to support workers. He said it would require more than supportive monetary policy to achieve and sustain maximum employment. So actually, it's almost like, um, Yellen and Powell are literally coordinating their speeches at the moment. Because obviously this is something very similar we heard from Janet Yellen just the other day, the push for more, for the politicians in Congress to do more, basically. So yeah, no, no real change here expected or was expected from Powell. That's exactly what happened. As far as Andrew Bailey and the Mansion House speak, um, again, nothing really noteworthy, but as we were anticipating given the recent timing of the central bank decisions. Otherwise, on the COVID front, the daily number of new, new coronavirus cases in the US was under 100,000 for the third consecutive day yesterday. First time that's happened since early November. But again, this is just reaffirmation of those trends. Cases, hospitalizations, deaths are thankfully all on the decrease at the moment. But again, underpinning the general talk now about the commodity supercycle and the reflation trade that not only is that improving, but the vaccines are obviously being administered and there's more supply of vaccines coming in the period ahead. I did see a really nice chart actually, um, I'll share it with the guys in the community. That was, you know, there is a bit of a divergence at the moment, as we discussed many times, that's helped kind of cushion outperform sterling against the euro counterpart, for example, because of how effective the rollout program has been here in the UK. But ultimately, once we get to kind of mid-back end of summer, all of those would have converged essentially as we go into the second half of the year, and you're probably going to see more of a uniform geographic recovery rather than at the moment it's kind of a race to who's first to inoculate in that respect. In terms of the calendar for today, it's very quiet. There's nothing coming out major UK, Europe. You've got US jobless claims, which is probably the highlight at 1:30 How important are they? First thing I would say, not very important. Um, and I say that because if this is a look at the, the jobless claims over the, the week to week since kind of mid-November, and last week we actually saw the third straight week of falling claims. It's obviously a good thing. Uh, and it was the lowest number since the last week of November. So actually you've gotta go back down to this 7/16 print we had then. Uh, the number today is expected to come in at 7.57, so that would put us down here and continuation of that trend. So an improving situation, and again, this does lend its hand to that kind of Goldilocks mentality that we're seeing all these other improvements including, um, the job situation very gradually. The point is it's not accelerating enough that Powell or his colleagues need to start thinking, wow, actually we've got to start thinking seriously about tweaking our guidance here. Because the economy is really starting to heat up, kind of ratified by the likes of the CPI that we had yesterday. Now everyone getting a little bit runaway with the whole kind of emergence of inflation, not quite here yet. And, and definitely as per the briefing yesterday and the notes that we issued, I think the, the, the greatest surprise was being on the opposite side of that trade, which was, well, inflation being slightly lower when it's been kind of talked up of late. So yeah, I mean, that's, that's pretty much it. I mean, unless you're a fixed income trader, there's a bit of supply coming out Italy in the US later, but that is it. So I'm gonna talk any more than that, gotta stay true to what I said, and wish you guys a good day. I'll see you tomorrow. Thanks very much.