US Stocks Hit Highs As Trump Returns to White House

Hi there, I'm Anthony Cheung and I'm the Head of Market Analysis here at AmplifyTrading. Every weekday morning I'll deliver a fundamental rundown ahead of the European Open, but if you subscribe to the channel you'll also get content from the rest of the team. So let's begin. Good morning, it is Tuesday the 6th of October. I thought I would start on that dramatic note of the president coming back to the White House in his chopper, no less. But yeah, of course, that being the, the big news from yesterday. As promised, he has now departed hospital and returned to the White House. And definitely, as strange as that might sound, that was taken as quite a positive late when he tweeted that, actually before he actually left in itself physically. We did see a bit of a pop into the close on Wall Street to finish firmly higher across the board, and that general sentiment has fed through in into the Asia-Pacific session. Quick look at things then, and I'm gonna wrap up some of the news headlines from overnight. And this was what Trump tweeted last night. I'll be leaving the great Walter Reed Medical Center feeling really good. Don't be afraid of COVID Don't let it dominate your life. We have developed under the Trump administration some really great drugs and knowledge. I feel better than I did 20 years ago. And the market actually did respond to that, and we did see a bit of a pop higher last night. I'm just going to bring up the S&P chart here for the moment to have a look at. And this was a little jump that we saw last night here, right on the right-hand side. But let me just remove my, my webcam for just one moment. So really strong push higher yesterday. And actually, we'll go back to that chart that we've been— we've we've been kind of running over the course of the last week or so, which has the complete narrative of the really topsy-turvy price action we've witnessed in the S&P 500 over the last— just, this is just the last week. This isn't 2020. This is the last week of 2020. And here, just drawing your eyes to the two main points, which is the red boxes here. Trump tests positive for COVID was here. And if you actually look at where we closed last night, we literally closed out at the peak So you can see here we had a brief rejection of what was going into the late European afternoon, a double top at around that previous high that we had printed back at the beginning on the 1st of October, and just busted through that on the back of the Trump tweet that he is in fact going to leave hospital. And now actually that providing a bit of an area of support for any price action that we're looking out for on the intraday basis if we do come back down to 33. 38. And obviously now looking for perhaps a little bit of consolidation. I would say that fast money move that we saw on the technical breach through that area of resistance, I don't think it's too surprising to see us push up to, as you can see here, right up to bang on 3,400. So the psychological level now providing an area of obstacle of resistance, and you can see that has also played out in the Asia-Pacific session. So at the moment, um, not looking to be too interested until we make or break on either side of these particular ranges for the time being. And on the daily chart, you know, we're coming right back up towards that area of that long-term trend line that we'd had in play all the way back from the recovery of the rally from April depths, if you like, on retest in May, June, and September. And now we're on the bottom side of that trend line but coming up to that retest. And we're at 3,400, it's quite a key level. Obviously it does encapsulate that previous all-time high that we saw before the pandemic really hit. And then also was an area of resistance back in mid-August before the eventual push out that we saw to all-time record highs. So quite a key area here on the upside, as well as symbolically moving back to that 3,400. But for the moment, I don't be too surprised if we just get a bit of a period of consolidation here between these upper and lower boundaries of 3,400 and really 3,388. So we're looking at here, we're be key areas to look at for the rest of today. But elsewhere then, other stock futures have followed suit, as I said, overnight in the Asia-Pacific session. And yesterday, really, one thing I was looking at last night which was quite surprising because I wasn't sat at my desk for most of yesterday was the performance of the US 10-year. And just having a look at that here, you can see really quite sharp downtick that we saw. This is going from Um, well, this was at the end of last week, so this is looking a little bit toward then when the payroll release came out, and then going into the first commencement of trade on Monday. And we declined a, a good amount. If you actually look on the daily though, quite an interesting area here that we've got to now, which is on the, on the bottom side, an area here you can see of resistance— or excuse me, support— going back to late August where we bounced, and then also bringing into play the 2nd of July. But generally has acted as a bit of a range here on the downside. And yeah, a decent push higher in, in yields yesterday with that equity strength. And generally the read across here is a couple of things. For one, in the fixed income market specifically, the prospects of rising Treasury debt issuance on this expectation of further US fiscal stimulus created pronounced bear steepening in rates, essentially long-end rates rising faster than short-term, given the expectation of then the recovery that would ensue and future inflation, given the fact then if fiscal stimulus is forthcoming in the near term and what that could mean then later on down the line. It does also come ahead of 3s, 10s, 30s Treasury offerings we're going to get basically kicking off today, Wednesday, Thursday respectively. And furthermore, there were several corporate issuers including Pepsi and Berkshire Hathaway who both priced 10-year tranches. For anyone who's not familiar with what that means, essentially what you can see is a little bit of downside pressure in the main benchmark 10-year in the intraday space in the futures market whenever there's competing amounts of supply. And that can come in the form of kind of high-quality corporate debt, particularly when it's issuing the same that maturity, i.e., a 10-year. And so that then can take away from some of the short-term intraday demand then for the US 10-year. And then also there was a slew of high-yield offerings, many desks noting a likely rush to launch riskier bond deals before entering a perceived pickup in volatility as we go into this US election. Remember, the US election is not just going to be a one-and-done deal done and conclusive at the beginning of November, it's like to drag out for the entire month. So perhaps then a lot of these other high-yield offerings looking to come to market in order to preempt that period of kind of blackout that they won't be able to come and, and get rid of that issuance. So a couple of things there, I think, which created a fairly pronounced reaction in the fixed income market yesterday, but certainly US 10-year is at quite a key level of support that's worth keeping an eye on. The other thing, of course, is the combination of the positive developments on Trump and also a little bit of movement on the stimulus front. Remember, these were the two key factors that we were commenting on that would be really pivotal for market sentiment and direction, uh, yesterday, and will continue to do so throughout the rest of the coming days for this week. But the positive risk tone did see the dollar offered yesterday. The dollar's crept up a little bit here into the European open. It's basically flat in the DXY at the moment, and that's largely reflected in the major pairs. Not too much movement in the overnight session, but both EURUSD and cable obviously moved higher yesterday, predominantly on the back of that, um, dollar weakness. And that came irrespective of the fact that ISM Services Index surprised to the upside with the headline printing at 57.8 against expectations of 56. 0.3. So if anything, it was kind of a, a unwind of risk premium into the dollar, just general renewed risk appetite. This was all very much Monday session. Equally so, obviously, these positive signals that we've talked about is going to give an underlying support to crude futures. WTI crude, you can see here, put in a really stellar day yesterday. And we rallied quite sharply, uh, going from really a $37 handle all the way up to nearly $40. Main thing people are looking at here, as oil has put in its biggest daily gain since May, growing optimism, more fiscal US stimulus forthcoming, Trump leaving hospital following his COVID treatment, dollar weakness as well also helping the complex, of course, from yesterday's move. So Simultaneously, this is overlaid with Tropical Storm Delta. I'll just quickly show you that on my chart here because it might be one that you're not too familiar with at the moment. But Delta is quite far out at the moment from actually close proximity to the, the sensitive Gulf of Mexico. But if we click here and you can see the directional movement, it is anticipated to be moving, um, that way. And so definitely warrants keeping an eye on as it drifts towards the Gulf of Mexico. It is poised to clip the Yucatan Peninsula before coming, or becoming, a record 10th storm to hit the US this season. There's been frequent weather activity in this particular region which definitely warrants monitoring closely. But yeah, just having a look at oil here, I'll put it back onto a daily chart and this, this rectangle here was a key area of support that we were talking about at the back end of last week, uh, that combining then the initial high that we saw on the aggressive gap down the beginning of March and that failed OPEC meeting that we saw on that outbreak of the price war between Saudi and Russia. And then we had the retest that came in the early part, 8th, 9th of September, has provided a bit of a force for price, and it has continued to do so once again here. Most recently on Friday before we've sprung back up in towards now sitting at around the 21-day and 200-day moving average. Moving then closer toward what's been going on, and I did mention Trump of course, and we did briefly look at the stock market. The stock market actually, if we go back just briefly to the S&P here I just wanted to measure up something, and that was the fact of how short-lived this— this sell-off has been since Trump tested positive. And if actually look at things, we are sharply higher than where we were even before that news broke. And if I put my currency indicator on, if we take the low of the morning of that news breaking on Trump to where we were at the peak of yesterday's price activity, you can see there, if you can see my mouse, We have gained 3% since that low, and that basically is in market activity given the weekend close, around 24 hours worth of price action. So really powerful rally that's been observed. And what can you expect from the president? Well, none other than him tweeting about the great stock market being higher, um, in combination with that dramatic video. He did another pre— um, address, if you like, from the White House, which he's been doing consistently the last couple of days, talking about jobs, jobs, jobs, and so on. So it's very much back to, to business almost, it seems, from that point of view. A few things about Trump then and his health. So basically, the medical team said that Trump has met and exceeded all the discharge criteria but is not entirely, quote, out of the woods, will receive another dose of remdesivir before going home, before having another dose tomorrow. Um, so that was the main kind of side of things. On the stimulus side, where are we at with that particular story at the moment? Because that also is an instrumental one for market movement right now. And House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone for about an hour on Monday and were preparing to talk again today. Although nothing has been agreed upon yet, and late trade reports saw GOP sources, um, suggesting Senate approval stimulus is still seen as doubtful for the moment. So definitely keep an eye out for any whipsaw price action that might come from any developments on that front. And as I said, Pelosi and Mnuchin will be talking at an unspecified time today. And so definitely that could be, could be important what comes out of those discussions. Otherwise, having a look at other news from overnight, we did have the Australian Central Bank decision. I would say going off the market economist consensus, no real surprises here. They maintained rates, expected to keep their cash rate and 3-year target rate at 0.25%. So it was all very much expected. Reiterated guidance that will not increase the cash rate until progress has been made towards full employment and inflation. But let me just bring the Aussie into shot and explain some of the recent price movement that we have seen here, because there was a little bit of fluctuation. And overnight, so when the actual release came out, we did see a momentary blip higher in the Aussie dollar. And if you remember what I was talking about yesterday There was quite a lot of the futures market positioned for a potential rate cut, irrespective of the fact that economists' expectations on the balance were for a hold. So a little bit of unwind of that saw a momentary blip higher in the Aussie but failed to sustain. And since that point, this kind of recommitment, I guess, for further potential to leave the door open for additional monetary stimulus, as you can see here, has just meant that after that move, we've just decided to break down a little bit. Actually, the most pronounced move overall on the Aussie has come as Europe has stepped into the market. And I know it looks quite congested here on the chart, but actually, if you look at the price action on a, on a smaller time frame, really it was a break of the overnight Asia-Pacific session which saw that run down in price to where we're at at the moment. And as you can see now, just keeping an eye on a fairly short-term trend line going back to the 30th of September. It's been tested a couple times. Any break below there, you've got that previous low that we've seen on Monday morning and the S1 here. So decent level of support might come in down at 71.64 if we hold the break of that trend line in the Aussie this morning. I'm just having a look then at the calendar for today because it has been relatively light. I mean, other than that, there hasn't been too much new breaking developments in other stories from the overnight session. Very much about how we ended yesterday was the, the main theme. So let's have a look at what else is happening. We've just had the German factory orders come out this morning. To just update you, industrial orders in Germany for August came in at 4.5% above the expected 2.6%. No real reaction to that though, um, in either the euro, the DAX, or the Bund future. The things I am looking out for today are mainly speaker-based, so there's not really too much in the way of major economic data today. UK construction PMI is seldom a market mover for sterling currency. Often PMIs typically typically is the kind of least impactful out of services being the most, manufacturing second, construction third. In the USA, you do get trade balance and JOLTS, job openings. The main thing I'm really looking at is this, which is a particularly busy speaker slate. Um, Christine Lagarde giving pre-recorded Wall Street Journal online summit comments, no text expected, but she does speak again then officially on the 10th anniversary of the European Stability Mechanism. That'll be at 2 o'clock. And what's going to be quite interesting today to watch, particularly in, in regard to the ECB, is you've got the president speaking and then you've got the chief economist Philip Lane speaking later on at 4:30 at a separate event where he takes the stage with the Fed Chair Jerome Powell. But the reason why this is important is, as I discussed yesterday in the briefing, Lagarde and Lane have had quite contradictory views over particularly the euro exchange rate. So be interested to see how that plays out today and whether there is any continued contrasting opinions, as per sources were indicating last week, about this split of opinion that's emerging within the European Central Bank Council. Jerome Powell then speaks at the NAB on global reset economics, business, and policy of the pandemic. So it could be a very interesting speech speech, and I do think that if anything is a lot more current than probably what the FOMC minutes that we'll see released tomorrow evening would be, given their, uh, how dated they are by nature. Powell speaks then at 3:30 London time. You've then got Harker and Kaplan, both of voters of a neutral disposition, speaking later on in the evening. And a non-voting member, Bostic, is also on the docket today. And that's pretty much it. So Overall, my assessment of things at the moment is I'm pretty neutral about how I feel about the open today. Equity markets obviously pushed up higher yesterday. I don't see anything particularly new here that would make me feel like potentially we're going to just repeat that price activity. If I was looking at the S&P here, that was a reference point. As I said on that other chart, potential I think for consolidation around these points, just given the significance. Now you can see quite clearly here the price activity for all October so far, that resistance turned support just helping the bottom side of that range. Then on the upside, if we do break 3,400 though, it does get quite interesting because there is a bit of clean air here to the upside and you can see there's not a great deal of technical resistance until we would really get up to around the R1, which would also be at around those previous highs. You can see here on the left-hand side, which would be more around the 34.14 type level. So I'm really quite interested to just keep an eye on things from, from that perspective. So a breach of those ranges on the downside, probably pivot, just looking to capture some of the initial lows that we've seen on the break higher up Um, before then, the push came upon the Trump tweet last night, and then on the upside, the upper bound at R2 and those previous highs seen back in early, mid, um, September if we breach the 3400, uh, or the 3388 kind of band of price activity. But I don't think it would be that surprising to see a bit of consolidation. Still a US-centric kind of session overall, I think, will dictate things, particularly given the fact that stimulus talks and an ongoing kind of monitoring of Trump's health are still of the order at this present time, and as well as monitoring a lot of these ECB president, chief economist, and Fed Chair Powell comments. Okay guys, that is it from me, short and sweet this time. And so I wish you a good day ahead and I will see you later in the week. Thanks very much.