Vaccine Focus Continues as US Virus Numbers Continue to Accelerate

Okay, very good morning to you. It is Wednesday, 11th of November. Hope you're doing well. I'm going to get you up to speed on where we closed on Wall Street last night, some things overnight in the Asia-Pacific session to be aware of, particularly for internet-based technology names in China, which are underperforming quite substantially over the last 2 days because of some new onus being put on from the government over that sector. And then we're going to look at just generally how the different asset classes are reacting, because we continue to see a play in response to the vaccine news that we saw earlier in the week. So once again, the NASDAQ 100 underperformed technology, as you can see here on the heat map from the close on the S&P. The underperformer, Amazon, down around 3.5%. Similar case for, for Microsoft as well. Um, but the Dow up again around 0.9%, the S&P roughly flat, slightly negative. So a couple things then to, to talk about on the, the vaccine, a couple of resources as well I want to share that I think could be useful for you guys, and then also an update on COVID-19, particularly in the US where case numbers continue to rise at this point in time. So let's just get into the charts then this morning and have a look at how things are setting up for the European Open. And stock futures generally flat in terms of the US space. The Nasdaq already underperforming again, so that, that general correlation being maintained for the moment with the tech sector under more pressure than the broader market as we see this kind of soft rotation, if you like, out of some of these big tech names. One thing I would say, and I did see an interesting comment out of analysts at SocGen last night, and I do definitely agree They said that a more systematic rotation out of big tech is going to be gradual. More certainty about the course of the pandemic and the introduction of a vaccine would be needed before such a change could take hold in earnest. And I, I do agree with that, although we're seeing this kind of rotation into cyclicals, or even yesterday with the tech underperforming the Russell 2000 grouping of small-cap stocks more tied to the barometer of kind of health or expectations over the US economy. That was up about 2%. So we're seeing a little bit of it at the moment. But I think it's a little bit too early to be cashing in your chips thinking that this vaccine is the silver bullet that's going to just fix the coronavirus, because I don't think that's the case. But for the moment, we are seeing at least a further continuation with yields still on the front foot at the moment. And that's pressuring the US 10-year down at the bottom right, which continues to remain down fairly sharply, nearly 2 points from where that we were before that news on Pfizer broke early in the week. Otherwise, in the currency markets, things are relatively quiet. The Dixie's pretty flat. Sterling again an outperformer. And on that note, let's just have a quick look at some of these charts then. And Sterling has been, irrespective of the looming Brexit negotiations, which remain at an impasse despite a looming deadline. As we've said many times before, that's kind of a side issue almost, because we know that there's always going to be flexibility and the real cliff-edge deadline legally is not until the end of the year. So I don't think the Brexit thing really is that crucial short-term in a day trading environment for sterling right now. What is, is two things: one, dollar fluctuation, and two, technical breaks of key levels. And We certainly saw that this rectangle bar goes back to where cable was basically trading before, uh, the, the market shakeout that we had on the pandemic on the first wave back in March. We came back and added as resistance back in the summer, in early August, uh, acted and price got rejected in late October. And then the breakthrough of that in yesterday's session just saw a further acceleration to the upside. So here now, technically, 133.20 in the futures would put us back up to the high printed on the 4th of September. So that's an area of resistance I'd be looking for. So potentially some more upside here. Um, on a side note, there was a phone call, uh, said to have gone on for 20 or so minutes between Joe Biden and Boris Johnson. There's obviously been some fairly harsh words from Biden before about similarities between the UK Prime Minister and Donald Trump, and also as well the Brexit stance that Johnson has held jeopardizing potentially the peace agreement in Northern Ireland has been something that Biden feels very strongly about with his Irish heritage. And apparently those phone calls were fairly lukewarm, but Biden just looking to assert his authority that there must not be a hard border in Northern Ireland. So, um, I don't think that's really a reason for the pound to be bid this morning. I think more so it's just holding on continuation of the trend which we've seen yesterday, just more favorable setup if anything rather than outright fundamentals, I'd say, in regards to, to sterling for the moment. The Nasdaq, as I said, is underperforming, has done since the beginning of the week when the news broke. And just going to stick this on a daily chart, and you can see here we got very close towards the all-time high in the futures before the kind of reversal came on the back of the news. We found a tick bounce off the 50 DMA, in fact, in the Nasdaq 100 future yesterday. And we're sitting at around the 21 DMA for the moment. So near term, if we remain under pressure, I'd be keeping definitely an eye on that low from yesterday's session that comes in at 11,503. That is around then the 50 DMA. Any breach of that market could remain fairly heavy until we get down to around— let me just remove this to make it a bit clearer— I'd be looking at around this area if I put a rectangle in the Nasdaq as a key area of support or target on any shorts, which would be 11,347. Uh, further down then, uh, bigger levels start coming in. Really, if we're looking at a, a much deeper move down at 11,000, just up there, 10,939 would encapsulate some of these previous highs and lows that we saw back in the early part of this month. Um, for the S&P, it's been relatively quiet yesterday, and, and I think that's a good lesson, of course, for any new traders. And that is the, the notion that after a big day of price activity, it's not uncommon to see just a bit of consolidation as people kind of pause for breath. You either are in a good profitable position after that day, or you're licking your wounds slightly, and that does tend to behaviorally reflect in price. Where after a big bout of volatility, it's followed by a period of relative calm. And that was definitely what we saw yesterday. And for now then, I think we're just watching this range. I think in the near term, you can kind of define a more tighter range, which is to pivot the overnight Asia-Pacific low kind of around what, 35.40 to 39 is the, the range at the moment. The deeper range though would be down at the S1, which would encapsulate then the close on Friday of electronic trade. The double bottom that we've now eked out both in overnight yesterday and yesterday afternoon trade with the S1 would be a key area of support. So kind of looking at this range at the moment, any breakthrough of that pivot and level could then see a push down in the direction towards the bottom end of that range. And if so, just looking to see what the status quo is at that time with the momentum, the general broader asset class movement and sentiment, to see whether or not we'd get a break. And if we did, further push on, or the reverse. Key level then would be looking any break of the top side of that range for a further push back on to the upside if that were to materialize. Uh, gold's pretty similar as well. Obviously a big move on the day of the, the Pfizer vaccine information breaking. Since that point, uh, similar to S&P, we're in a bit of a tight range at the minute. On the downside, be keeping an eye on the low that we printed in the futures during the, the evening yesterday, so late US hours around 1871. And on the upside, around 84s would be the top end of the range that's been in play for the last 12 to 20 hours or so. The other asset, of course, which continues to outperform is oil and oil markets continuing to kind of take heed from the fact that if a vaccine is forthcoming, it's going to pick up in demand expectations, less globalized lockdowns. These would all be bullish fundamentals for oil. And if you start to extrapolate this with technical levels being breached, you can see how the market had a, had a kind of false break initially in the Asia-Pacific session banged on the door a couple of times on that key technical level, which was the high that we saw going back to the 20th of October. And now we've just accelerated up, and the near-term target for just generally speculative, speculative traders would be up at around the, the R1 level at 42.62. On the daily then, you can see the, the importance of that technical breach and what's assisted some of that upside. If I just put a rectangle here this kind of area. Again, if I just color it just to make it as explicit as possible, so that area has been such a good one. We can even probably extend that out even further if I just was to click on the rectangle here into some of the price movement as well that was helping support price on the other side of this level, which was during August. But you can see it's acted as a real significant area of resistance since mid-September, and the breakthrough of that, we found and tested some support. So it's a nice platform for price now, and we've pushed up to that next area of relevance at 36. On the upside, if we continue to move higher, I'd be keeping an eye here on 43.32, which brings in not only the, the kind of area and cluster of highs that we were printing back in the the summer, but also was that low we printed back on the 2nd of March before that failed OPEC meeting gap down came in in early, early March. So kind of here would be a key level to look out for. Any breach above there, then oil can get— can move pretty quick on the upside. And certainly that will come as some relief to the OPEC+ members, who seemingly— market participants generally are happy to brush aside the fact that Libyan oil production is back to towards now like a million, which is very high, um, comparative to where they were just a short time ago. As kind of civil rest or an agreement within that region to stop the infighting has helped production return. And then the other thing, of course, that we had last night was the API oil inventories. And just having a quick recap of those, another bullish factor to just help act as a catalyst on those technical breaks to draw down in the headline figure of 5.1 million, deeper draw than expected, 3. Cushing draw 1.2, gasoline a much deeper draw than expected as well at 3.3 million. So all adding to that directional play in, in crude oil. But let's have a look at a few things. In particular, I wanted to talk about, um, this, which was Pfizer. Now I released the briefing yesterday Hopefully I made it fairly clear about reasons for a little bit of a reality check, perhaps possibly sounding a little bit pessimistic about the initial very positive reaction that we've had to the Pfizer news and BioNTech when it broke at the beginning of the week. And the same things are being reiterated now in, in much of the major press. So Bloomberg leading with the article that's pretty similar to our discussion talking about the stuff of, you know, the cost of transportation, distribution is amplified by the fact that you'll need a second shot one month after the first, adds to the logistical kind of complications. And also, as I said, the cost, given the fact that the degree of this particular vaccine is ultra-low temperatures of around, I think, -70, -75 degrees Celsius, which definitely makes it more problematic for developing world countries who generally don't have that infrastructure for that type of facilities. So the cost implication would be very high. Not only that, the vaccine goes bad 5 days after thawing as well, so there's kind of a, a time span on how quickly it needs to be implemented after it does reach its destination. And not only that, no current vaccine has ever used the mRNA technology as well. So a number of hurdles perhaps that, that still need to be, um, to be crossed or, or leaped over. Uh, at the moment though, the market, as I said, um, equities have kind of continuing a rotational, a moderate rotational play, uh, out of tech and certainly a little bit more now into a more cyclical-based kind of view based on the economic recovery now on the back of a forthcoming vaccine. I would say, as I said before, a little bit early to get too ahead of yourself for a more deeper acceleration of that rotation out of tech. I would say one of my colleagues, Eddie, did a great chat in the Amplify Live room yesterday, and he was talking about the fact that yes, Zoom shares have come off considerably from their highs, these kind of pandemic plays have been unwound, for example. But, you know, when you talk about the priority of who is going to be getting and receiving these shots, there's obviously an order of, an order of hierarchy given the elder people first. So if you are a young 20, mid-25-year-old employee working in a general industry that, that can accommodate online delivery or services or, or just general carrying out your business activities, well, that's not going to change because by the time it drips down to those demographics that are less prone to catching this disease, they're still going to be using Zoom in the meantime. So, yes, perhaps those shares are a little bit overstretched given how far that they've risen over the period of the last 6 to 8 months. But I think it's a little bit much to say it's kind of the end of the road for a lot of those individual single stock names. So yeah, on that point though, another chat we were having with our traders internally yesterday was about, look, what's really important now then is that market sensitivity to coronavirus updates is very high. And so therefore you'd be remiss not to be a kind of semi-expert in at least Knowing the landscape of how many Phase 3 vaccines are in large-scale testing at the moment, what are the corporations involved with it, what are the differences between the testing that they're doing, the vaccines that they're trying to produce, which ones have got more chance of, you know, success rate, and therefore how do you anticipate then the timing and how the market subsequently might react when that news breaks. And There's a really great tracker that's been done by the New York Times. I shared this on my Twitter account yesterday, so if you go on my handle, scroll back through, you'll be able to find the actual link to this. But if you scroll down, not only does it give you kind of the general update about how the clinical trials work and, and so on, some kind of general knowledge stuff you should be aware of, but you can filter the list of vaccines. And so if you do phase 3, which is generally what we're looking at here You can see Moderna, for example, the BioNTech-Pfizer one, and it just gives you a nice short sharp summary of exactly what it is, how much has it been tested, what is the timeline, what's the likelihood of approval, what are the obstacles, you know, just a nice competent knowledge base that, that will be required if you're really going to get hold of any subsequent news that might come out. And as I said, I think at this point in time now the election really old news now. The main macro narrative is going to be driven by the vaccine because that's going to determine then what the economic outlook looks like in the future. So this isn't going to go anywhere— go away anytime soon. And so I think definitely swat up on this stuff if and when you have time. On the COVID side, I just wanted to give a quick update. As I've been discussing throughout the buildup to the US election, It's almost been forgotten that the US is currently suffering quite an increase in COVID cases. The US reported a record nearly 143,000 coronavirus infections as of Monday and appears poised to reach the most hospitalizations yet later this year. I even saw a stat this morning that US cases reported by some sources to to be now at 200,000. These are— these numbers are rising consistently at this point in time. What you're looking at here on the chart then is kind of the death toll tally. The 7-day average is probably more important to look at rather than the isolated number in itself. And the thing I just want to draw your attention to is that since mid-October, this number has been gradually rising. And it doesn't really show much sign of plateauing at any point soon, particularly with the acceleration we're seeing in national numbers across the board. Now, you remember during the election a week or two ago as well, it was definitely the Midwest that was seeing the bulk of the cases. Well, Ellen, Illinois, Wisconsin, Ohio, they reported record single-day jumps in infections yesterday on Tuesday, continuing the rising trend in that region. However, New coronavirus cases in New York State now are nearing 4,000 a day. The tally is the most positive cases since the start of May, uh, when New York City cases were at their peak. New Jersey reported nearly 4,000 new cases as well. That's an 87% jump in one day. So yeah, definitely those highly populous areas, if we see another breakout back into the Tri-State area, definitely these numbers have the propensity to increase rapidly. Elsewhere, you know, the UK numbers continue to remain pretty elevated as well. So Britain recorded 532 COVID-19 deaths, the highest total since May. So this is the case number, which was up 2% from where it was last week. But if you look at the death count, that's now up to the highest it's been since we were kind of coming down off that first wave peak. So we're still a long way from where we were back in the depths of the pandemic in March when the numbers were well in excess of 1,000. We're about half of that at the moment. I guess the thing to, to watch here is the steepness of this curve and how persistent the, the kind of rolling average increases are as we go through day to day. The idea being the closer up we get towards this type of area, the more likelihood is that, you know, we've got to move on beyond the current level of lockdown that we're in to something even more stringent. And that obviously is going to have far-reaching economic implications. In mainland Europe, still they're under pressure. France reporting most fatalities since April yesterday. So definitely this COVID situation, the market is very absorbed at the moment on the positive, positive developments on the vaccine. What I'm kind of semi-anticipating this week though is that that optimism will fade as reality kind of kicks in. Look, this Pfizer situation, you know, a government like Matt Hancock, the health secretary in the UK, yesterday saying, right, start, start, you know, building up the factories, get ready, the shots coming for Christmas. It's like, look, do understand that politicians need to drive a narrative to manage public perception. And so what politicians say and the deliverable dates they'll put forward almost entirely will be missed because that's— then they're not looking to be accurate. Their objective is different. It's about perception, control of fear, which can consequently impact then things like confidence and ultimately the economy. So if they can maintain positivity in generally in the public mood, that's a good thing. However, don't be fooled by thinking that the dates they're putting forward would be accurate deliverable dates because they're not going to be, I can, I can assure you. So things to be aware of, particularly this COVID situation as well, which at the moment is being overshadowed by the vaccine situation. But, but if these numbers do start getting to, as some reports would suggest, 200,000 cases in the US and still seemingly there's no real definitive, more immediate action being taken in the States, things are going to get worse before they get better. At that point. Now that does bring about questions as well about, well, what's the situation with stimulus? And this is Mitch McConnell, of course, the Senate Majority Leader. He said yesterday he did not see a need for a giant coronavirus relief bill, and there were bipartisan interest in passing an omnibus appropriations bill before the end of the year. So it again, this idea of a vaccine, it removes the emphasis, or at least market expectation, of a large-scale kind of stimulus coming in. And so that's a double-edged sword in itself, in the sense that, well, if the COVID situation gets worse, did I actually need to deliver something with a little bit more magnitude because overall, more likely so that by the time any implementation of this vaccine starts to go out on a worldwide basis, you're talking about well into 2021, if not 2022. So time is of the essence. And so the deciding factor on the size of that bill, I guess, is going to be determined by the COVID situation, any subsequent lockdowns. The RBNZ overnight, not going to spend to spend too much time on this. They didn't change rates, they didn't change their QE program. This was all very much as expected. They also, as expected, began or announced their new funding for lending program, which is going to commence in December, aimed at reducing banks' funding costs and lowering interest rates. As expected, they were though quite upbeat on their view of the economic recovery, and as such, traders, as you can see here, have actually priced out now. The chance of negative rates happening next year was the main kind of takeaway. Looking at the calendar for today, it is actually very quiet. There is nothing major coming out from an economic data point of view at all. There is the OPEC monthly report coming out in a few hours' time. Speakers as well, there's a few to be aware of. ECB Focus, Lagarde, de Guindos, so the two kind of the president, the vice president, and the chief economist Philip Lane is also going to be speaking. All of those based in the afternoon. So I would say focus is probably going to remain on the general themes that's been in focus over the last day or so. Be mindful and vigilant of any further vaccine information that comes out. But for the moment, I'd say fairly range-bound activity in some of the US equity indices. Now keep an eye on them. Don't range, I guess, either side of that trading band that we're in at the moment. Same case for gold. With currency markets, I think no point in fighting the trend at the moment with cable, which continues to move higher. And then we discussed those key levels in oil, where generally fairly favorable headwinds there now, both fundamentally and technically. And this leads us up then for the all infantry numbers, which we're going to get a bit later on. All right, that is it. Any questions at all, let me know. Otherwise, wish you guys a good day and, uh, yeah, see you same time tomorrow.