US Passes Stimulus Plan - Buy The Rumour Sell The Fact?

Okay, very good morning. I hope you're doing well. I'm gonna go through a couple of different things. First of all, as you can see to the chart to the side of me, stocks worldwide posting their first back-to-back gains in more than a month. Quite incredible. So just having 2 days of going up in the equity market globally has been an anomaly of late. But yesterday was one of those days. Obviously, we can touch upon now the kind of more concrete— the confirmation, at least of the Senate, for the US stimulus package that now goes to the House. But it's going to be kind of fast-tracked from here, generally speaking. So now that's now into the system, the question, of course, comes, well, where do we go now? Do we now start to see that priced in? And it's almost like that, that positivity is over, or do we continue to push higher? And I guess these are some of the things that we can discuss, as well as the jobless claims. A lot of people will be talking about that later, also some virus updates and so on. But before I begin, don't forget, if you are watching this on YouTube, to subscribe to the channel. It is my birthday today, so if you want to give me a treat for my birthday, hit that subscribe button and we're all good. Uh, if you're, if you're lucky, we might send you out one of these. I've got a bit of, uh, of the merch going on, the Amplify t-shirt today. So, um, yeah, let's get this, uh, let's get the show on the road. So as you can see here then, you know, from the, the chart, back-to-back gains. What does that look like from a broader context then, setting us up for the session, uh, this morning? Well, things are, uh, relatively I guess calm, but a little bit of profit taking perhaps in the equity space given what we've just said. Uh, the Dow futures down about 340, the DAX is down just over 250 at the moment. So T-notes up about 8 ticks, you can see here in the bottom right-hand side. And then gold, gold if anything just backing off slightly from some longer-term levels. We're going to have a look at some of these charts technically as in terms of the last part of my delivery So I won't touch too much on those at the moment. But FX markets, the DXY's down a touch, having seen some weakness towards the back end of yesterday. So we're down 2 tenths there. So both pairs up, albeit cable relatively flat this morning. Don't forget as well, UK data. I think it's because of the lock— the lockdown issues, but also some of the ability for the Bank of England to try and counteract this leaking of data and things like that as it goes under review, given some of the things and difficulties they've had in recent months. So UK economic data continues to come out early, 7 AM. We had retail sales, but it was all backward-looking numbers, so it's not really anything too much to, to worry about, quite, quite honestly. So let's go straight into some headlines, and let's start then with the Senate. What exactly have they done? Well, they've passed a historic $2 trillion $1.2 trillion virus rescue package. And as I say, the financial crisis package was about $800 billion, so this far exceeds that one. It equates to about 9.5% of US GDP, if that helps give it some context. The package includes injection of loans, tax breaks, direct payments for major corporations, individual taxpayers. So it's very expansive, very far-reaching, as we said yesterday, much in a similar vein to what we had in the UK and we've seen in other places. Um, so I don't think this is really new information. Uh, the confirmation of this going through the Senate, I wouldn't be expecting that to be like the, uh, the ignition then of another upward move. I think we saw that 2 days ago. That was when we had that biggest stock market rally since 1933 in the Dow and 12 years in the S&P. So it's kind of done in that respect, which does put us, put us at quite an interesting, I guess, juncture now for equity markets. From whether or not now we start to see a renewed kind of push on the downside or not. A few things though that I thought was quite interesting that a few people I've seen have mentioned, and that is that actually over the course of the beginning of this week, so Monday, Tuesday, Wednesday, generally trading volumes have been relatively low. And some would say then, you know, when we've seen these massive bouts of volatility, obviously it can act as a bit of a trigger point then for real flush in markets. You get these— our algorithmic systems also hitting the moves. The volume typically is quite high on those days, and you can see that period really of mid-March volume really peaked when we were seeing these big multi-swings. Remember, the Dow, uh, since mid-March up until really the end of last week, we're seeing an average price increment percentage-wise about 7%. So these are huge moves, but that has dropped quite considerably. And if anything, you know, although we did see we're still seeing some pretty sizable moves in the equity market. Generally, it feels a lot more, let's say, smooth in terms of some of the price movement than what we've been seeing of late. The other thing as well is the volatility kind of indexes. So the VIX, whether this is looking at the Euro Stoxx 50 or if you're looking at the more broader benchmark, the kind of S&P VIX index, but generally speaking, still elevated but off the initial highs of where we were which were way above the global financial crisis. So we have pulled back now to kind of the sovereign crisis level, if that makes you feel any better. So still very high, but again, volatility decreasing, volume generally traded levels decreasing. Perhaps the general lockdowns that we're now seeing in mainland Europe, in London— I know some people have said in the FX markets that has— is having implications for some of the traded volume. And therefore some of the subsequent movement as well. So perhaps that might explain it. But a couple of these you could interpret potentially as signals. You probably saw the hedge fund manager Bill Ackman of Pershing Square. He was loading up and, and on his portfolio of his long-only positions now, just looking to rearm and build up more long positions in some of his equity holdings. There's been some other portfolio managers saying similar type things. So I guess these all could be, if you're more of a bullish mindset, some good signals to be seeing in order for trying to ascertain whether we've hit a bottom or not. For me, I'm not quite convinced at this point. I do think that there's a potential for more downside because irrespective of all these measures, and particularly those that we've seen from governments now, from the US, I mean, there's not a lot more now the US can do. Kind of like the UK, they've now played that big they fired that big bazooka, same way of which the ECB, the Bank of England, and the Federal Reserve have done. So now it's down to now the development of the virus, I think, which carries the key as to whether or not we have already found a bottom or we're going to get another retest at those levels. And so, uh, prudent of course to have an update on the virus situation. We're now total confirmed cases 472,000, deaths just north of 21,000. I guess from these countries on the left, the ones that continue to be the most, uh, under watch would be Italy, 75,000 cases, uh, but deaths now in Italy at 7,500. So more than double that of mainland China. Uh, the US is going to leapfrog them though very quickly. Would not be a surprise to see that in the next 24 hours, 48 hours, I would expect. Spain also has been a key area as well, which has grown quite considerably in terms of its death rate. The UK still tracking just, just shy of 10,000 for the moment. So if you're looking at that from a trajectory point of view, from the rate of number of cumulative deaths, New York probably still one of the steepest, and that's probably one of the most worrying given then the US in my mind still has— we're still so early in the cycle. And to make that have a bit more sense. This was a good graphic that I saw from JP Morgan analysts yesterday, and this is, this is a simplistic version of just the distributions in order to plot roughly where we are in terms of the development of the virus. But there's, there's two important things here for me, and this again is what I think will determine whether or not we've hit a bottom or not in markets, and that is the US and the UK. And if you actually look at some of these other European countries, uh, like Spain for example, we're still really in the early development or acceleration phase at this point in time. I would agree with this graphic, it's probably a day or two out of date. I'd say probably all of these have shifted slightly, uh, further along the curve. But the idea here is being that people like China are way beyond that at the moment. As we've discussed at the beginning of the week, they're looking to gradually re-open generally the infrastructure, particularly in places like Wuhan, the hardest hit given the origination of the virus in that area, and then a full opening, if you like, on the 8th of April. Um, but that's the important point on 2, but let's finish 1. 1 is, you know, things are going to get a lot worse, and at this point, yes, we have tried to get ahead of that, hence the reason why you've got a $2 trillion rescue package already put into play, because we know it's going to be bad. This is very important for, I think, the reaction the markets are going to have with jobless. Quite frankly, I don't think it's important. It is going to be bad, we know that. So by definition, then, I don't think it's going to come as a shock. And so I think its potential to move markets might be fairly limited, in my opinion. So here, I think these numbers are going to get drastically worse. And as I said, the US, I feel it's only a matter of time, it's almost inevitable they will have to adopt similar type measures to what we've just deployed in the UK this week, which is much more onerous rules, more strict about home or being at home in self-containment to stop the, stop the spread. So that's part 1. Part 2 is this other part which is down here then, the recovery phase. Now the recovery phase, the reason, the interesting thing here is if we go back to Here you can see— well, let me, let me scroll. It's probably a better one to look at would be countries. So rather than cities, we're looking here now. You've got a lot of the Far East nations, so Japan, South Korea, but there's a few things here that people have been mentioning. JP were saying about the recent infection spike has actually occurred in Hong Kong and Singapore. Now suggests as long as the global infection curve is developing premature relaxation of heightened community risk awareness could set off a rebound of controlled infection curve or a second wave. You know, what if you see this wave here, which is what we're generally living through globally at the moment, but when China reopened— that's what we're just suggesting here with Hong Kong and Singapore— and you start to see another, another renewed spike in cases and deaths, do we then have a secondary, more flatter wave perhaps as another round goes through? That for me would be a massive negative for markets because then, you know, governments and central banks have just got to go even further at that point. And yeah, the question marks on how much, you know, it's kind of like every time you do, you fire your bazooka, your bazooka becomes a little less effective in terms of trying to manage market prices because we get accustomed to it in that sense as market participants. So they're kind of the two things I'm watching here on this curve. One, the acceleration phase, particularly in the number of these mainland European, UK, and particularly the US. And then two, do we see a secondary wave of infections if there's a premature relaxation of the rules that have been put into place in order to delay and contain this virus in these other areas that are further down the curve. So that for me is going to be particularly key, I think. All right, um, quick look at some other things. This is some UK data, did come out earlier this morning, was UK retail sales. But honestly, it doesn't even warrant me talking about, to be quite frank, because this is February data and the the virus in terms of its impact in the UK hasn't really started to pick up until the middle of March. And so this data really is redundant. But one thing we do have later, to my understanding, according to the Bank of England press office, the Bank of England rate decision is still going ahead today as per normal. I would anticipate though it's going to be a non-event in the fact that we've already seen them have their inter-meeting decision anyway, so we know what the situation is. In that respect. So we'll see how that plays out. I'll update you more as we get closer to that event. Otherwise, having a quick look at the US session— well, let's just check mainland Europe. You've got the— well, there's nothing really too much. ECB Economic Bulletin, money supply is not going to be market moving. So going to the US session, you get the GDP numbers for Q4. Remember though, you know, we're in the end of March now, so these Q4 numbers are very dated, and the market is much more obsessed now about forward-looking. Remember, even if Q4 GDP comes out this afternoon in the US unrevised at 2.1%, that means nothing because Q2 potentially could be a negative 30%. So hence the reason why these old data points, particularly backward-looking, are really quite irrelevant at this point in time. The one though that probably is going to draw a lot of attention is this one. The initial jobless claims, you can see here on investing.com, is expected to be a 1 million reading. This was a graphic that I saw last night. You might have seen me tweet it. Um, this was looking at a couple of— just a selection of Wall Street banks and their expectation generally of what the initial unemployment claims and projections are for today. Now estimates range, as you can see here, from just sub-1 million up to 4 million according to Citi for the week ended March 21st. Uh, the low end of this range, so even if I was to take UBS, that would be more than threefold increase from last week's number, just to give you a guide. Uh, the number of states specifically citing COVID-19-related layoffs, um, is why these estimates are so high. They've already been quite explicit in that it's going to impact the numbers. Many states reported increased layoffs in service-related industries, as you would imagine, accommodation, food services specifically, as well as transportation, the warehouse industries, these types of things. The two most recent peaks in jobless claims that we've had, some context, in 1982 and 2008, the financial crisis, were much more gradual. Uh, trying to recall the number in my head, but I think I was looking at it yesterday. It was more like seeing half a million clips in terms of the jobless change when it came to the financial crisis. Because remember, at that point it was companies gradually going, kind of going under, going bankrupt. So it meant then there was these gradual waves of unemployed, whereas with a virus it's contain and delay. Everyone must work from home, everyone, every small, medium business needs to make an immediate decision about their economic future. Remember, the scary time was just a week ago, you didn't know what the government were going to do, so that uncertainty then could have been a trigger for these small businesses who can't afford then to take that risk and had to cut their, uh, their staff and have quite large layoffs across the board. So hence the reason why this is very different. This is going to be a much more elevated number. As you can see, Citi on the top end, 4 million. GS, as we discussed on Monday, 2.25 million. UBS, a little bit more pessimistic with the figure— well, I shouldn't say pessimistic, it's probably the wrong word— a little bit more lowball with their number at 860,000. But as I said, in summary, I mean, would I look at this figure and it's kind of drama and it's kind of like a non-farm payroll release, we all wait for this figure. Yes, it's going to be interesting. Yes, obviously it is a reality of the situation. These are factual layoffs, but in terms of then adding to this jobless claims. But at the end of the day, I think it's been so well telegraphed and talked about, I don't think now 4 million I mean, 4 million is toppy, but a number in the millions I don't think is as surprising perhaps as what it could have been. That's what I mean. If the number is, let's say, north of 4 million, I guess then it could add some additional weight to the just general precarious nature of markets from a sentiment point of view at this point in time. And perhaps that could trigger a bit of a move lower in equities and a bit of a flight to quality bid, perhaps, because that would suggest that things are actually the worst-case scenario, so to speak. Let's have a quick look at a couple of charts. Before I do, just a quick word. Andy did email me yesterday, so feel free to follow and message me on Twitter if you ever have any questions, or if you're watching this on YouTube, just leave a comment or a question. I'll always reply throughout the day. But I got asked about, can Trump cancel the US election? So this is what I found. The, the short answer is no, he can't. Under the US Constitution Amendment 20, Trump and Vice President Mike Pence cannot stay in office past their allotted 4-year term without being re-elected. If the election does not happen for any reason, constitutional rules of succession kick in. So one thing to be aware of though Obviously, just because it hasn't happened before and just because Constitution has its rules now, that doesn't mean that cannot change though. An old antiquated law dating back to basically post-war time in 1948 whereby you could have a different interpretation of the text that was used that could move the date a little, from my understanding of what I've read, back a little bit, i.e., a couple of weeks, but probably you wouldn't be able to go any further than that. So if there were a delay, probably a very short one, and then the election wouldn't actually need to take place. So again, much is legal text. It's all about one's proof of how you interpret certain terminology that's used in some of these old, old laws. So yeah, hopefully that answers your question, Andy. The answer is no. I can see why you, you would ask that question though, given the virus, and does he need to delay it in order to get a bit more of an economic recovery on the way so he's got more of a chance. But to be quite honest, I think he's going to be able to do what needs to be done to spin a bad situation in his favor anyway. So I don't think that's going to happen in terms of— I think the election will still go ahead, all things being equal at this point. All right, let's have a look at— quick look at some charts. Um, I just saw the S&P 500 was flashing session lows. This was a chart I had marked up from yesterday. You might have seen I did tweet a few, few charts yesterday. And don't forget to check out— Sam is still sharing all his charts via his Twitter account while he is not doing the briefings with me for, for the moment. So here, obviously, a couple of markups. You got the Fed, the initial volatility we saw on the Fed announcement back at the beginning of the week on Monday. Then you've got the US stimulus rally. So remember, the stimulus rally came 2 days ago. So this is just kind of— it's almost like buy the rumor, sell the fact type price action now that we've seen. Because yesterday we peaked, we got up to that level, which was the high that you can see here from going back to the 17th. And then we just came back quite aggressively really into the late US session yesterday before we then had a little pop perhaps just going into the beginning of the Asian session. But again, under a little bit of pressure this morning. That does bring into context perhaps quite an interesting area. If I just put my ellipse on— so if we come back down, you've got the S1 level here, you've got that double bottom that you can see from yesterday's price activity. You can see a bit of resistance there on the, the prior day on Tuesday and the Fed blip high as well. So if we did remain heavy, quite a big area of support there to keep an eye on. Now that we're below where we had a markup at around 2448.30. Uh, potentially that could be a downside level to target today if we were going to be moving any lower. Otherwise, a quick look in some other markets. I was looking at WTI crude oil last night, and we're pretty much locked into range-bound activity at the moment. It's been particularly quiet from the likes of Russia and Saudi and so on. So at the moment, we respecting this range, you know, and I'll continue to play that accordingly unless something really meaningful develops. Now, that meaningful development could be either a comment out of Russia or Saudi, or it could be then, uh, let's say jobless comes in at 5 million, that acts as then a kind of ignition for price movement downward in, in equities. They start to break some key technical levels I'd expect then that to also start to feed through into the, the crude market and just add a little bit of further weight as people become more bearish again about the future prospects for the economy despite the stimulus. And then you'd be looking for perhaps a break, we come back up to the level, and then look to then play the market back down. So perhaps you have the target here at that 23rd low, and then you can keep the second part of the position on, looking to target down at these levels here. So 1, 2, if that was to materialize. Again, on the upside though, similar case really, but just playing the other way. So just keeping an eye for this range, top end of the range that we've traded on the week. Any break above there, I'd probably be looking then up at around the $26 handle. You can see that, that comes in within a 10-cent range of that previous high that we printed on the 20th just here. So pretty much just watching the range for oil for the moment. It has been in a bit of a phase of consolidation so far this week. For gold markets, yeah, really interesting actually for gold because we've kind of got up to that high yesterday. You've got quite a defined clear resistance level here psychologically on the 1700 in the futures. You can see we ran up to it On Tuesday we had a retest of it, um, later on in that session right at the US close, and then we've kind of come south ever since that point. I was just looking here on a slightly longer time frame. This is a 90-minute. So that double top that we, we were just referring to here, I mean, that's your 1,700, and you can see it is a big level. If we go back to the beginning of March, had a little breakthrough but failed to close above it. And same thing happening again this week. And so that continues to be a key level. But as we've continued to remain quite heavy, just quite interesting to see, we've had a bit of a bounce after initial test that was seen, um, in what, the overnight session. And if we come back down to around that 1612.10 level, you can see I've got it marked up here, those highs that we've previously— the market has responded to around a similar price point. Could be quite interesting. And again, if that does start to break down, uh, if gold— let's say if we have a bit more risk on, if equities do start moving on the, on the upside, uh, then perhaps then we could break through that and see a bit of an extension through to $1,600 as a target. Uh, you've got $1,605 as well, the S1, before we would get to that point. Again, any reversal though, if, if we've talked about those other markets where equities, oil coming under pressure, perhaps if that was to happen that again looking for the market to respond and move back higher in this type of fashion and for it to act now that we've come down quite aggressively about $80, $90 for it to act as a bit of a safe haven short term again just on the intraday basis just given now that it's relatively low comparative to the price action of the last 12 hours in that sense. Last thing I'll look at is the pound Again, I was just— I was having a chat with a few people online last night, of which I'll show you in a second. But the pound's main— is quite buoyant this morning. We've managed to break— you can see the trend line just from some of the near-term price activity that we've had. Also then taking out the highs that were seen from the overnight Asia-Pacific session and also from Yesterday evening, that's now helping price just continue to edge higher. And keeping an eye here, you've got the weekly high coming in at just ahead of the 120 handle. Now up here is really quite important, and what I mean by this is this level here is key because if you start putting on a weekly, this is now looking at— hopefully you can see my annotations on this chart. This is looking at a much longer-term picture of cable. Here we start to bring in the EU referendum. You can see on the left-hand side all the way through the journey of cable, if you like. There was that— 120 was massive, you remember. I mean, look at the— if I just move this so you can make it a bit more clear, you know, the flush in prices that we had, um, at the beginning of March. Well, it wasn't even that long ago, 2 weeks ago or so. As soon as we broke 120 it came crashing down quite quickly. Then 1.16 soon became 1.1466, the low in the futures. But you can see this sharp recovery that we've had. We retested that, got rejected. We've, we've seen a continuation of the bounce, particularly with some of the dollar movement of the weakness on the back of some of the Fed moves. So here, cable's at a real key point, and where we close today could be quite pivotal. If we close above that 1.20, Does it remain a little bit more bullish? I guess, you know, Sam's your man for making those types of calls from a technical perspective. But yeah, that's something that's going to be really interesting. I think that's a really big level coming up here around that 120. You've got the previous high, as I said, there at 91 as well in the sterling futures. So I definitely would be keeping an eye on that for sure. All right, one of the things I have been saying is that, yeah, I was doing a webinar last night, and the webinar I was doing if you ever did want to join, is on our Amplify Now. 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I'll put the link to that into the description of the video for anyone interested. All right, well That's it. Gonna leave you, and I'll see you online. Any questions though, just feel free to leave me a comment. Alright guys, have a good day.