What Next For Markets After DOW Hits 30,000?

OK, very good morning to you. Hope you're doing well. Wednesday, 25th of November. I had most of the day off yesterday, away from the desk, and unsurprisingly then we hit the 30,000 when I'm not around. But it's OK, I can live with that. But hopefully the, the briefing yesterday was helpful because a lot of the kind of positivity we were talking about and the kind of three elements of the Biden transition coming into effect with the Yellen nomination from the president-elect for the position of US Treasury Secretary, and then ongoing with some of the COVID developments with the vaccine from AstraZeneca at the beginning of the week, all positive catalysts. So the kind of simultaneous nature of these things all happening at once with technical breaches on some key levels, such as like within oil from that break of the late August high, just saw moves really start to accelerate. And much of this morning really is the kind of morning after the day before. And I say that because it's slightly reminiscent of a, of a hangover. It's the idea then, if you're particularly new to financial markets now, of not now doing something inappropriate. Often what you can see with new traders is they come into a day post-yesterday when there's kind of nice more uniformity to market movement and correlations, and they just start approaching it like we're going to have a complete repeat of the type of moves we had yesterday, which more often than not usually is not necessarily the case because market prices obviously move. They factor in now the new kind of what's priced in for the events all the catalysts that created that movement in the first place. So unless something more meaningful now develops, it could be you either see consolidation or in fact perhaps even a little bit of a pullback then for the continuation of the trend that was materializing. So really just having a look at the charts here, equity index futures in terms of the overnight Asia-Pacific performance, it kind of followed on from the higher close on Wall Street, gains ranging from around 1.5% to 1.6% across the three major US indices. The futures then, the Dow well and over and above the 30,000 level, 30,165 in fact, the high print that was seen in the futures market. At least that was in the overnight Asia-Pacific session. Then we just faded the move slightly before we've consolidated now going into the European open. The Dow, NASDAQ futures still positive, the S&P marginally so by around 6 points. Uh, the 10-year is pretty flat for the moment. Uh, just looking at gold, obviously that's been quite the focal point of this week, just given the renewed breakdown of what we've had in price, given the breakthrough, the relative consolidation that we had had from the initial first vaccine Pfizer low that was on the 9th of November, and then around the retest we had back on the 19th, and the breakdown we had at the beginning of the week then just keeping gold heavy, uh, for the time being. And now just looking at that $1,800 level, you can see right down here in the bottom corner, any type of bounce and retracement would be looking at some quite interesting levels, which would be around a recovery up to $1,809.06 in the futures, which was the high that was seen in the overnight session before the push down to then the retest, which is the range of overnight, which was yesterday's low. Any further recovery from that point, then looking around 18.8, which would be the low and the eventual break from Tuesday session. And then above there, same kind of pattern, the big move that we had on Monday, the floor of that with the eventual break, which saw some quite heavy follow-through. Then for the recovery, and then the kind of classic short moving, moving price action back down lower, and that would be around 18.28. Um, so that's how I'll be looking at things on any type of upside recovery. Some good areas of resistance here using the, the pattern from the kind of descent in price. And if we look on the daily, um, there's the one area which a lot of people were looking at, which seemed quite a long way off, but actually having moved now a decent amount of $150 in, in gold in a very short period of time, you can see that breakdown in price now just more evident of where we were trading back down to around the consolidation of July in the summer, uh, that coming in with the low end of that range, as this is a lot of what we were talking about yesterday, coinciding with that 200 DMA blue line, which is around 1795 or so. And that's where the, the market found some support both yesterday and also in the overnight session. So that's a key area now that may well hold for the time being just given the, the scope of the move seen thus far, wouldn't be unusual to see perhaps a little bit of a range forming now from around this 95 up to around 18, 19.5, 20, which was basically a reflection of that July range that we were trading in. So that's the, the gold market. The oil market was, was certainly quite interesting yesterday because we had on a daily chart We were very much so yesterday talking about keeping an eye on that late August high, which was the recovery from the pandemic movement that we've seen since the course of this year. And the break above that level just saw a real acceleration of the price, not only the summer high, but also that March 2nd low point, which was quite key as well, going back prior to really the pandemic kicking in. And the breakthrough that saw a quick acceleration straight up through $45 in the futures, which was our kind of target on any breach of these levels. And I know a number of the guys in Amplify Live got a hold of that, so absolutely well done on the back of that move. Um, here now then, where we're looking at is, uh, $45.72 is the overnight high in the futures, but around there starts to encapsulate the low that we had on the 5th of March and also the 27th of Feb. Kind of around here, and they'll be quite key. But any more firm definitive break in the continuation of these moves, and really there's not a great deal more, um, wouldn't be surprised if people would feel quite a bit more bullish here for a continuation on a push higher. But perhaps more importantly, I'd say for the rest of this week, we've probably got now a decent level of support will come in on that same level that was restricting price, which will now be a floor for price over the course of the coming sessions, is how I'd see it. Um, and then in the equity market, uh, just having a look in the— well, let's have a look at the S&P quickly, and then we'll look at the Dow, and then we'll go over some of the headlines. So here is the S&P, and I've just marked it up with Uh, this is a Dow with an area with a colored rectangle of probably an area that I'd be keeping a fairly close eye on today. Let me just remove my, my camera so you can see the actual chart a bit more clearly. And so this encapsulates then the kind of overall moves that we've had going back to the beginning of the month. That was that Pfizer spike that we had, which was the most kind of prevalent given that was the first time that breaking news came out. We've had those other moments, the Moderna kind of high and so on. And so just looking where we are at the moment, um, this kind of goes in step with much of my overall view about where we might go from, from here, which is I don't think it would be, um, that unusual to see a bit of profit taking. We've kind of seen that emerge in the overnight session, a bit of Asia follow through, then fatigue setting in. I think if we did get back down lower though, an interesting area around 36.20, which was the, the previous top of the price action on the 17th and 18th. And then you've got the pivot residing just below at around 17.75 and 18. So, um, that could be quite an interesting area for a pullback for the longs looking to follow then this move back up. And then just using the framework of this current price action to kind of manage that position on the expectation then that we continue to just push on up, not back just to the overnight highs but to the eventual high that was seen back on the 9th. So kind of similar case with the, uh, the Dow. So again, my idea here being that I prefer the long positioning, but now it's just about being disciplined to wait for the most optimal entry point. And just jumping in, getting long at this point, I don't think it's probably the most astute play. I prefer here, again, looking at the Dow, and we got the pivot level which was around 29,890, which was that previous resistance. You can see on the 16th, 18th, 24th, before the break came, also came back down close to that level for the push-up that we saw, um, yesterday, which which was in the late US session. So kind of like that area, if it comes back down there, um, it could be quite interesting. On the downside, any breach of that, then the potential for a deeper move back down to correct below 29800. And then obviously, and any longs just looking to come back up towards some of the highs that were seen initially in the US session and then up to the overnight session high. But again, I only really like it if it comes back down to around basically what would be the pivot level. So yeah, that, that, that's pretty much it from overall summary. I mean, the actual news flow I'll talk you through now, it's very light. In fact, I think one of the main important things to, to also take away from yesterday's move and then also to apply to today's mentality is that the COVID situation is still progressively worsening in America. I mean, the latest that I saw last night was California yesterday reported its second biggest jump in coronavirus cases on record, logging more than 15,000 new infections for the second time in 4 days. So this, of course, as well comes with— US traders will probably look to head for the exit early today. That's normal procedure ahead of Thanksgiving, where all US major markets are closed on Thursday. There's normally short hours on Friday, but most traders will then take an extended period off and not return until, till the following Monday. So in terms of today's market session, I'd say perhaps then volume-wise and consequently any types of movement might be quite early into the UK afternoon, and then things might start to quieten out as we go further in towards the Wall Street close. But the other thing is then The point I wanted to make was about COVID Although it's getting worse in the, in the US, I think you've got to trade what you see. And at the moment, the combination of multiple fundamental forces all coalescing in a positive way with some technical key breaches of long-term levels that caused price to kind of be exacerbated on the moves to the upside. I think that was just trading what you see, really, and not overthinking it. Certainly, I think the COVID situation will come back. It's very unusual for the market to remain in this kind of period of hysteria for long. Now that we've achieved $30,000, the next kind of meaningful area on the upside then is what, $31,000 or $35,000? And that's still a way to go. And in that period of time, obviously things like Thanksgiving, the tangible effect of that as a potential super spreader event will probably become known in the next 10 to 14 days. And so that, I think, will be quite an interesting pivot point. And if that puts us back into mid-December, and given the extremity of the equity outperformance that we've seen, particularly just coming in post-Biden and the election victory, then any large kind of sizable portfolio rebalancing that might take place by some of the bigger players in the market as we go in towards the end of the year It could be something just interesting to think about. But again, you've got to think about timing on a day trading environment. It's always important to, you know, just go with the flow to a certain extent and be aware, be aware of what's going on fundamentally. But then timing is quite key. You can be bearish on COVID but still be buying this market because timing-wise, the bearishness of COVID might not materialize for another couple of weeks as yet. Is one I'm kind of alluding to. So yeah, that, that's my overall take at the moment. So, you know, no, no need to be rushing in today, you know, just try to reset mentally and then just go at it again. So yeah, a couple of headlines to update you on. We do have the UK spending review happening today. This is Rishi Sunak, obviously the Chancellor, He'll set out a £4.3 billion plan to tackle the threat of mass unemployment. The OBR, the Office of Budget Responsibility, forecasts are expected to show much higher unemployment and unsustainable public finances. I guess something that's more interesting here that we tend to see, and a couple of nuances here, is the fact that the spending review is, is being fairly short-dated. Normally we'd have a budget and that would outline for multiple years, but given the lack of clarity and the fluidity of the situation with COVID and we're talking about kind of more short-term 12-month outlooks of what the government intends to do. The bit that's normally more market moving, and this is really more typical for if you are trading UK fixed income, so gilts, is the type of issuance that comes out the DMO, the Debt Management Office. Now the DMO is set to announce today almost £100 billion of extra issuance between December and March. So again, you've got to— the government's got to raise money in order to pay for the phenomenal amount of spending that it's doing at the moment. This takes the full fiscal year amount to £482.8 billion, as you can see on this graphic here. And according to a median estimate, that figure, according to a median estimate of 12 primary gilt dealers, that of course, as you can see here, is more than twice the previous record we had in the financial crisis. So again, to put the pandemic into a bit of context, the amount of government spending that's been adopted by the UK to deal with the pandemic, and so the subsequent amount of issuance that the Debt Management Office for the UK have had to, had to conduct, is twice the amount of what we had during the kind of GFC. So quite, quite incredible really. Um, but from an overall take, if you're trading sterling, uh, even the FTSE, things like that, typically the spending review doesn't really create too much in the way of a market reaction. The other thing, of course, is that a lot of this has been well telegraphed in the press. You can pretty much get the full entire breakdown already, even with articles like this on, on Bloomberg, of exactly what it is that he's going to be saying, what he's going to be outlining, all these types of things. So it comes as very little surprise surprise. Nonetheless, he begins at 12:30. The other thing we've had overnight is some oil inventory data. Um, in terms of oil, it's backed off a little bit in the overnight. So again, looking at the structure of price away from that longer time frame on the daily chart, looking at the more intraday perspective, I just marked up this rectangle, uh, solid area of support here. You've got the 45 handle, the cap on the initial rally into the US Open and then the overnight bounce that we've had in the Asia-Pacific session on the, the break that came early on. So you've got a nice kind of framework to work with here. You've got the R1 on the upside of the high, you've got that nice area of support on the low. So probably just waiting here now for the DOE numbers to hit a bit later on to see where we go. On that point then, you had the APIs last night, and as I said, the, the market did actually move considerably higher overnight when Asia-Pacific session begun. So largely a lot of the API numbers are just brushed aside to some respect. But just so you're aware, ahead of the figures later, the headline build was 3.8 million, quite considerably larger than expected. Draw of 300,000. Cushing draw 1.4 million, um, so notable Cushing drawdown, um, as opposed to then the build we had on the headline. Gasoline build 1.3, distillates draw 1.8 million. That leads us then on to, um, what have we got for the session ahead? So the ECB Financial Stability Review and Rishi Sunak's spending review, I don't think are going to be particularly that interesting, to be quite honest with you. So it's going to be more of a US-centric session. And given the fact that we've got Thanksgiving, basically North America or the US have crammed in all of their data releases into one afternoon. So what typically would be things we'd see on a Friday, like University of Michigan for example, is actually going to be coming out today. So note that today at 1:30 you get durable goods, you get the second preliminary reading of US GDP for Q3, you also get the core PCE numbers, you also get initial jobless claims, personal income, uh, you've got core PCE, University of Michigan, new home sales, and the DOE oil inventories coming out, as well as the FOMC minutes, uh, later on of course this evening. So a heck of a lot coming out, in fact. So again, I think it will be a US kind of based session in terms of what we're looking out for in regard to a more definitive market direction. And then just looking and playing with these charts then from a more of a technical structure standpoint Looking at, um, keeping an eye on the dollar, we're still at this precarious kind of long-term level support. So there is still that potentiality of a further destruction, if you like, of the dollar in the short-term environment. And those major currency pairs in EURUSD and Cable are still trading quite close to some key higher levels on the upside. So again, just quick look on those charts. If I look at cable here, you've got a little bit creeping up here as, uh, UK European players come in. And then you've got that 1.34 handle, which is quite a nice level on the upside, which coincides with the R1, which was the high that we had on Monday's session with some of the renewed dollar weakness. And then just looking at EURUSD, you've got the R1 just acting as a support this morning, just above there. You've got an area of the, the Pfizer spike high that came on the 9th, which is up at 119.29 and a half. Again, I've marked up this rectangle as a key area of interest, quite a significant— both directions, both resistance through the mid part of the month and then a support area in the overnight session to see this latest bounce that we've had. So be looking at that to hold up as a floor for price for the moment. It will be quite key. On the COVID front, obviously in the US— or in there, in Europe, excuse me— Italy on Tuesday did report the highest number of COVID deaths in a single day since the end of March. But countries like France, then as expected, Macron came out and outlined a phased and cautious reopening of the economy in a stepstone approach starting from Saturday. The UK PM said the four nations of the UK will have agreed to relax COVID-19 restrictions for Christmas to allow 3 households to meet for up to 5 days. So again, the perception of dollar weakness really emanating from the factors that really drove price yesterday. Obviously, Janet Yellen is quite a key one for me, really, given the fact that she'll be closely aligned with working with the Fed in a cooperative way rather than in conflict during the Trump administration, Mnuchin era. And also her disposition for erring on the side of being cautious and gradual, i.e., dovish, helps play out with that idea then that without any forthcoming stimulus factors coming in, people will be of this mindset of lower for longer mantra that will help support general market sentiment, equity valuations, but also put more downside pressure on the dollar. So keen to watch that. If that does materialize, then be keeping an eye as well furthermore on those commodity prices in oil and gold. Final thing is, if you are already on Amplify Live, or if you're not, do feel free to check it out. If you just go— I'll put a link to this if you're watching this on YouTube— but amplify-trading.learnwells.com is our kind of portal our trader hub. The reason why I'm pointing this out is not only do we have live streaming throughout the day, but we host every Wednesday evening what we call a masterclass where we get our internal senior traders to go over some of their specialisms in a kind of interactive format in a private webinar. But we also get industry speakers, and tonight I'm quite pleased to say we've got Nick Baker who co-founded the world's leading asset and wealth management consultancy firm. He now works in a variety of different roles, and one of those being he's our non-executive chairman here at Amplify Trading. But he's also just got some really great experience about a number of different things. So really looking forward to having a chat with him later on tonight on Amplify Live. So if you want to join us, just, just check out the link in there. The description. Okay guys, that is it. Gonna wish you a good day ahead and I'll see you in the live chat room. Thanks very much.