Trump Tests Positive For Coronavirus: What Does This Mean For Markets

Okay, very good morning to everyone. Hope you're doing well. Um, big news has broken just literally in the last hour or so, and as you can see here, I'm sharing a tweet from the US President who has tested positive for COVID-19, and we've seen quite a big reaction already in markets as I speak. Actually, gold just breaking up a little higher here, session highs just going over the overnight range. So gold has already rallied $25 here. But before I begin, I have Sam North, our head of trader development, with us. How's it going, Sam?

Yeah, good, thank you. What a story to wake up to, but it's 2020, isn't it? So nothing can surprise us. So yeah, no, good to be here as usual on a Friday.

Great. So look, let me, let me start and I'll give a quick update the charts first, and then I'm going to run you through exactly the Trump news and a bit more detail, and also what is the actual procedure here in this type of situation as far as who governs the US now, uh, where does it go from here, how does this impact the election. I'll talk about all of that in more detail. So starting off then, let's just have a look at these charts here. You can see the market has stabilized a little bit. When I first sat down at my desk this morning, it was just after 6 AM The news had just broke. And actually, if I just put my S&P chart here on full screen so you can see, this is the S&P. And I'm going to put it onto this chart here because this is one I've been marking up and annotating as the last 3 days has been evolving. It's been such a seesaw couple of days for the S&P 500, predominantly based on the will they or won't they come together with some kind of compromise on Capitol Hill over the stimulus program. Which I can say that is, that is still looking unlikely at this point in time. But you can see the, the most severe candlestick print here coming on the back of that Trump tweet where he said he and his wife have both tested positive for COVID-19 and are beginning to quarantine and start their recovery process. But you can see here the breakdown out of what was a key technical level that was in focus and did provide a decent level of area support in the overnight Asia-Pacific session. Again, Asia a little bit lighter than normal. China out obviously for Golden Week. Some of the other areas as well in the Far East were also closed for market holidays. But when the news broke, came down very rapidly, uh, early as Europe came into the market, uh, close proximity to the lows that we were printing back down onto the 30th of September, which was on Wednesday. We've recovered a little bit since, but a little bit of risk-off trade then observed across the board. As I mentioned, gold here has already shot higher. We were trading down around 1895 before the news. We've now just printed a high at 1920. So pretty sharp move already. The currency markets, there was initial dollar bid. However, it's reversed a little bit. And so major pairs have just stabilized. The move probably not as pronounced so far in the currency market, definitely more equity-focused. The DAX consequently is down about 100 points. And then WTI crude also just edged a little lower. Here you can see kind of moving in tandem with the stock sell-off and quite an interesting, I guess, cap to price here. Just given the way of the lows that were printed yesterday, European afternoon, you can see a break on that. It got a little heavy, ran down to the S1 in that fast money move this morning, and it just bounced back up to find some resistance to those previous areas of support now in crude futures. Fixed income markets. And as you would expect, fitting in tandem with gold and reverse inverse to equities catching a bit of a bid, the US 10-year up already to its R1 to find a bit of resistance in the futures, up 4 ticks. The Bund futures up about 11 this morning. But look, let me switch over my screens again. I'm going to just run you over a little bit of my initial take here. It still is pretty early actually, and I've been trying to think about a number of different things to try and make it as useful for you guys as possible. So let's start at the beginning. What exactly is the current status? Well, the kind of chief physician for the president has said that, rest assured, I expect the president to continue carrying out his duties without disruption while recovering. So I guess, you know, making some assumptions, It would appear then at this present point in time, the president's health is fine, but definitely this is one of the main points of which I would definitely be monitoring. And one of the ways, I guess, in a very rough sense that I could suggest monitoring that is by looking at his frequency of tweets. Now talking about this with Sam this morning, obviously when he was debating, it's almost as if someone else takes ownership of his account and can tweet at the same time. But I think the kind of the way of which he himself tends to write his tweets in terms of the vocabulary and the language, I think is quite recognizable. So given the fact that he was actually supposed to be scheduled to hold a rally in Florida tonight, followed by two more rallies in Wisconsin on Saturday this weekend, the former of course being such a pivotal battleground for the likely outcome of the US election. And so if he's not tweeting multiple times over the next couple of days, that for me would be a slightly worrying sign that perhaps his health is deteriorating at that point. So something to just be aware of. There is a reference point, of course, other heads of state have contracted COVID-19. Probably one of the most recognizable ones for us is our own prime minister here in the UK, Boris Johnson. At the time, he deputized Foreign Secretary Dominic Raab to handle some of his duties when he entered intensive care. Remember, this is right back in the beginning of April. He never though formally transferred his power at that point in time, even though he was— his health reaction to the virus was actually quite severe. But for Trump, I would say that, you know, even not being in the office doesn't mean he can't tweet, given such ease it is to use and access that platform. A couple of other finer points here: the US Constitution's 25th Amendment allows Trump to hand over control to the Vice President and then reclaim it as soon as he declares himself able. So that's just something to be aware of. It has happened in previous presidents before. I think George W. Bush did it when he was receiving surgery. Previous points during his tenancy in the White House. So that hasn't happened yet, of course, but there is already predefined kind of procedures in these types of situations if it should become necessary. Following that through, if Trump and Pence, the VP, are both unable to fulfill their duties, neither then could evoke the 25th Amendment. The Constitution instructs Congress to legislate a line of succession which was most recently updated in the Presidential Succession Act that goes back to the late 1940s that puts the Speaker of the House of Representatives next in line for the president. So if they were both incapacitated, Trump and Pence, and we don't— there's nothing to suggest that would be the case for Pence at this point, then Nancy Pelosi would be the interim president, if you can believe that. So Definitely worth thinking about these things as they continue to play out. Now, the next televised debate is actually not Trump-Biden. It's going to be the VPs, and that's scheduled for next Wednesday the 7th. Trump-Biden round 2 was scheduled for the 15th of October in Miami, and then the third round on the 22nd of October. So whether or not that happens is obviously yet to be seen, because now he's going to be going into quarantine, self-isolation, and so on. So, you know, I was talking about it with Sam this morning. It's interesting, we were having, um, we were kind of talking about, well, look, let's try to release our mind a little bit. What could be the play here? We know Trump likes to push to the edge of what's possible to try and frame a certain situation. A couple of things we were coming up with, one was the idea about you know, the timing seems just so good for contracting COVID-19 and then being out of action perhaps for 2 weeks to then come back and almost appear triumphant, like a hero coming back from the ashes. And it kind of— you can just picture that kind of, um, the kind of the way he would spin that in his favor. So could he be faking the entire thing? I mean, it's an elaborate thing to try and to cover your tracks, I would say. But who knows? I mean, certainly I was trying to think of ways of which, even if it was real, how could he now spin this if I was working for him as a chief political strategy officer, I'd be thinking, right, how can we turn this into a real positive? So that'd be something I'll definitely be thinking about the weekend, and hopefully on Monday I can piece something more together for you. But yeah, Sam, anything that, that you think and you'd want to add? But I know you said as well, what if Biden gets COVID?

Yeah, I mean, that would just— I mean, with 2020, I guess that's kind of to be expected, something crazy like that is going to happen. But I'm really interested to see the the, the developments and the stories that come out for the rest of the day. It's going to be such a headline-driven day, much like we saw in the pound yesterday. Um, yeah, I want to see how, you know, obviously fingers crossed Trump does recover, of course, but how bad and severe it is, because obviously just being diagnosed is that first step, isn't it? You know, is he going to be struggling or is he actually completely fine? Um, it'll be really interesting to see. Certainly the weekend is going to be headline, headline, headline, isn't it?

Yeah, yeah.

I mean, definitely, um, you need to be keeping an eye. I know, um, IG have that Weekend Dow, Weekend Markets. They're always a good indicator of generally that kind of closure of major markets to see how we'll open, if we gap lower, let's say, if his health deteriorates, or the opposite, and actually, you know, everything appears absolutely healthy and fine. It's just a precautionary measure, he's quarantining, and there's no immediate effects, and we could gap up quite significantly. I mean, in terms of the other news that's out there before I kind of let you look at the charts, Sam, the House passed a $2.2 trillion Democrat-only fiscal package last night. 214 to 207 saw no Republican support. As you would imagine, they're still quite far apart on this. Sharp differences still remain. The Trump administration rejecting the scale of aid Democrats want for state and local authorities. Pelosi demanding the end of tax breaks, um, so that she said is devoted to only helping the wealthy. So there's still— the stimulus isn't coming, which obviously adds a little bit of, of negative headwind given there's been some ebb and flow of positivity and negatives— negativity throughout the last couple of sessions. So definitely it could be an interesting end to the week in that front because we've also, of course, got payrolls coming. And the last thing that you want is a bad payroll number with a lack of forthcoming stimulus with Trump. If we get updates that his, let's say, pertaining to his health perhaps deteriorating, it could be quite an interesting close here. And you would be looking for a general risk-off continuation of the moves that we've seen. The other points that they'll look out for definitely is that this news, the timing of the news when it broke, the US probably haven't really reacted to it as yet. So when they start to come in early, so London time, half 10 AM, 11 AM, I'd definitely be mindful of potentially a second type of feed through into this move. Now whether or not we get a repetition is yet to be seen, but be particularly mindful if you're in any open position going into that North American crossover. The only final thing, Sam, really— I know you can incorporate this into the charts then— is Brexit. Um, yesterday was a, um, a real classic day of why you must use Twitter if you're going to be a real agile headline-driven, uh, kind of intraday trader, because all of that source-related comments, exclusive comments, it doesn't really come through a lot of it through traditional channels like news terminals like Bloomberg and Reuters, for example. It comes via Twitter because journalists want to break the scoop before it then becomes public knowledge, and Twitter was great for that yesterday. So Michel Barnier will meet this morning with British counterpart David Frost to discuss whether they're in a position to enter final intensive stage of talks. This comes obviously after Brussels launched legal action yesterday against the UK for breaching that withdrawal agreement. Now, with that, I was quite firm myself yesterday when the market was coming off. I did think it was a little bit unnecessary because I've always thought personally that this whole internal market bill was brought about by the UK as leverage for these talks rather than something that would ever actually be in action. And so Europe coming back looking to pursue legal action against it, I think, is all just part of a side issue to actually the talks that are continuing at this point in time. And we obviously saw that, that FT journalist breaking and the market reversed, started to rally, um, yesterday afternoon. So a couple of points here, uh, definitely be monitoring, uh, Twitter. I wouldn't really want to be, um, in too big a position of size would be my recommendation if you're trading sterling today, because you saw yesterday you can get caught out quite quickly. My words of advice here also would be if there is a tweet or a breaking piece of news and it's confirmation of entering tunnel talks, or the opposite and we go strongly bid or offered, then just be mindful of proactively managing that trade quite quickly. Look for a nearest and clearest way to take off either a large portion of the trade, if not the entire thing, because as we saw yesterday, competing news agencies do love to then break counter or contradictory stories, and that can lead to big whipsaw price action. The market can flip on itself quite aggressively. So if you're in that environment, you've got to, you know, not hold on to things for too long. Don't try and be overly optimistic here, just manage that position accordingly. Um, Johnson has set that October 16th deadline to reach a deal. As I've said before, I think that's unlikely to happen now. EU counterparts, though, have said they're willing to wait for longer and haven't ruled out continuing into November. And that's what we heard from the French government official, of course, yesterday. So whether or not they have agreement to go into more formal talks, kind of similar to this week, but going forward, say, next week or the week beyond all these so-called tunnel talks, whether or not these happen could be a definitive thing short term for the pound. But again, don't forget you've got payrolls at 1:30, US factory orders at 3, Fed's Parker or Boettcher at 2 are all things as well to be on the lookout for, as well as that crossover period. So the US reaction interpretation to the Trump nukes when they come in. Okay, Sam, I'll let you have a look at a few charts from a technical perspective.

Nice one, thank you, Anthony Cheung. Let me just share my screen. We'll start um, by having a look over the, the US equities. I just need the, the host to, uh, yeah, to share things. I think it's going to be a reactionary kind of day. And what I, what I mean by that, there's going to be headlines out, not, not just non-farm payrolls and, and people speaking, but also updates on, on how, uh, how Trump is doing and Brexit. Like I said, and obviously one of the most important things about trading, if not the most important thing, is self-awareness. If you as a trader are someone who struggles, you know, uh, when markets are faster paced or you're reacting to data or, or whatnot, or you don't have to trade, then this could be a day where you do just sit on the edge. However, some levels to be aware of, uh, for me, the, the 9th of September low across the board on equities is massively important. Um, and the reason, uh, being is it was such a good support point initially on the 9th. Uh, we then broke above it the beginning of the week, and it's turned out to be a really good floor, most like, uh, well, clearly, more clearly in the Dow, but S&P as well. So for me, further selling will take place should we close below there, and then I think it's a quick move towards 32 just based on how the chart would go. Headlines are going to move these things It's important to, uh, on your, your Twitter, at least have the tweet deck on another screen if you can. Uh, to the upside on the, the daily charts, you know, I've been talking about this for a long time, 3414. I'm still with the view we finish above there. It is all-time high season. Uh, so going to a more intraday chart for the S&P before we have a look at the Dow and the, uh, the NASDAQ, you can just see already the importance that that we had from the overnight, uh, on the 30th, last day of the quarter and month. That's already turned to be some resistance there. So you've got a key level, the market is looking at it. So if we push above, we can then look to continue and push on maybe to towards the, uh, the low that we had from yesterday evening coming in around on the futures 33.50. So that's another key level. Uh, you saw Anthony Cheung mark up that level on oil, which we'll come over to in a moment. That's turned out to now be a ceiling and price pushes lower. So market, uh, is, uh, well, the market is looking at these levels for some sort of guidance. A continuation, uh, will be, uh, in order if that does, uh, push on and we, we break through. I think we haven't, you know, looking here, had a 15-minute close below 3307, so that would be key. But then just be aware of the low of the week is just a tiny bit below that. The Dow Jones, as mentioned, the 9th of September low is, is really key. Was then the low that we had a couple of days ago and almost today. You can see here there's still the European Open to deal with, there's still the US Open to deal with, there's headlines, there's non-farm payrolls. You know, the day absolutely isn't over, and we could absolutely get back below this 27,000 sort of handle, and then price can, you know, push to the downside. But it's much like the S&P in that the levels just above where we're trading you can see are most likely, you know, going to act as some sort of resistance on the way up. So just be careful. Put your charts— I would say for the, the more important levels on your 60 minutes, those previous lows, and they're going to act as, or should act as, some sort of resistance and lines in the sand above there. Then maybe there's been some positive headlines and we can start to see a push to the upside. If not, it's an opportunity right now where people will be looking, uh, to potentially get short. The NASDAQ, I haven't actually checked the daily chart for quite some time. It's that line in the sand, which is pretty much the 9th of September sort of low. You can see around here, but it's also the 21 and the 50-day moving average. And that now we've broken above, both of those have acted as support. The top end of that resistance, which is the same for the S&P around 3,414, the high that we had back on the 8th, 10th, and 16th of September. That has been a double top now. The end of the week is going to be fascinating. What happens over the weekend is going to be just as fascinating. I mean, what a week it's going to hit— well, well, what a futures open it's going to be on, on Sunday. Uh, as determined today, it's, um, you can see here with the euro, but in early trade, I mean, the story sort of comes out around, uh, well, was it sort of early hours, 6, actually pops lower, but then has actually since the headline pushed to the upside along with the pound. It is slightly choppy, isn't it? Do you necessarily want to focus on this right now? I think with the pound Brexit headlines, that's your focus if you want to trade those. There were definitely opportunities yesterday to do that if that's the kind of trader you are. Mark your levels up just above the pivot. You've got a solid level resistance which capped price to the upside, uh, yesterday. Obviously you've got the low of today, but I would say now you've got to be focusing on those lows from yesterday. And then also to the upside, what has proven to be a good level in the early hours yesterday, literally 24 hours ago, uh, around here, 1.2954. Those would be the 3 points of interest for me today on the pound that I'd be looking to, okay, use it as resistance or an opportunity to get long to the next level, uh, should headlines come out. The euro, as we were just on, you can see has been pushing up. It's a similar kind of level just above its pivot, I think, is a very key resistance point. So be aware that just because it's above the pivot doesn't necessarily mean it's going to push on. You do have the high of last night, uh, late last night I should say, just a tiny bit above that. These markets on the daily charts are also, if not more fascinating than the those of equities. You can see this whole week we've been grinding back up to what was super level support. We break through, we hit that yesterday as resistance. Technically speaking, it's a great point now to look to get short. Do we close the week below? If we don't and we close above, well, to be honest, I see 119 pretty quick. For the pound, let's just bring that in. The low that we saw last week has held fantastically. The bulls want to see price get above 130. Almost did yesterday. Headlines would help that today. A close above 130, technically, uh, as quick as we see 119 in euro, I see 132 in the pound. However, these highs hold and we can start drifting back lower. 128 to the downside, a very key point as well, that if the bears want to take control, they want price below that as well. Quick look over at gold and oil just to, to wrap things. You can see gold is, is enjoying it. Uh, acting as a safe haven today. And with the dollar slightly weakening, funnily enough, over the last, uh, 30 minutes or so, like you saw in the euro and the pound, has helped it push on above its high of the week, high of yesterday. Big resistance coming in just— well, almost on the high of the day, 1925. You can see the highs of the 22nd, so worth keeping a watch on that. And even a break above that, you then do have the previous low before we really did break down on the 21st. That comes in on the futures around 1931. So some big levels to, to be aware of all the way up for, for gold. I think from a, you know, you're happy to stay long gold as long as it stays above yesterday's high. If equities reverse, if there's positive headlines regarding Trump and the COVID announcement, uh, gold is most likely to come under pressure and then, you know, break back below that high. However, on the daily chart, it's, uh, you know, you can see the importance— oh, I don't want to modify that— you can see the importance of the low that we had last week. So like with the pound, like with the euro, like with equities, they all found a very solid level of support going into the back end of last week, and then obviously the end of the month and quarter. Uh, but then looking at the daily chart, look how key this whole support point is. Gold bulls need price above there. Today is an opportunity for that to happen, and if it does, uh, then it can really sort of stretch its legs next week, you would say. Also be aware trend line coming from the, the high of the 18th of August would obviously come into play. Quick look at oil. Let's get Anthony's level one, very key one to, to have, and what a level it has been. You can see here, if I just bring in the pivots as well, yesterday's low turns out to be, you know, an area of resistance, and, you know, it's almost back down at the low. Another level the market is looking at. So that said, if we can get, you know, a decent close above there, that's when you can get a run to the upside, and then suddenly you're looking at 38.11, and then the high of the sort of the, the 5:45 candle, 38.50s, and then the highs of the day. However, it holds and then we do start pushing down again. And obviously you can see on the daily chart, uh, we're not far away. Let's remove that from the low that we had last month. You can see coming in around 36.41. So keep a watch on all of that as an area of support. A weekly close below there, which isn't out the question would obviously not look very good for, for oil traders at all. But Anthony, I'm expecting a, a pretty headline-driven day, so I hope you're, you're on your toes. You're on mute.

Yeah, thank you, Sam, for looking around the charts. I hope people found that useful. But I just wanted to say I'm sharing the YouTube channel here And I know this is where most of you guys are watching this, so don't forget to subscribe. And me and Sam and a few of the other guys, we're going to go live, uh, to cover non-farm payrolls. But also, of course, we can give an update at that point in time early into the US session about how things are playing out, because I'm sure things will evolve potentially as the US start to wake up and come into the market. So what should we do, Sam? 1 o'clock London time?

Yeah, yeah, it makes sense to me. I think it'd be— be— it could be a completely different story by the time you go live in market. So, uh, yeah, I'm actually really looking forward to it, but 1 o'clock sounds great.

Okay, good stuff. Well, um, we'll see you guys later on, and, uh, yeah, otherwise, if we don't speak to you before, have a good session ahead and have a great weekend. Thanks very much, guys.