 Okay, very good morning Thursday 27th of February. I hope you are well and usual routine I'm gonna talk about a little bit about the broader sentiment at the market open here in London and mainland Europe and then Sam will take over and look at the charts from a more technical perspective But before I really get stuck into some of these headlines Let's just have a quick look at the charts and how things are shaping up this morning And yesterday had another down day in the Dow lost about 123 points Overnight the age of Pacific session that kind of carried on generally US index futures traded down in the the overnight session And so even though we had a bit of a bounce as Europe has come in The Nasdaq still down about 78 the S&P 26 and the Dow is back down about 235 at the moment so still a lot of apprehension almost in the market about the The kind of factoring in are we at at the moment a realistic pricing in of the new norm with the virus with the outbreak Beyond the shores of or the boundaries of China or is there more to come and that's still very much the dominant driving Catalyst for sentiment still Interestingly, I was just having a look in the the currency markets. Obviously the euro benefitting from a couple things one I'm sure Sam will talk through the kind of technical movement that it's seen But I was just looking at the currencies overall and the dollar index is down about two-tenths. I mean cable It you know euro dollar upward movement is a lot more clear than cable but cables flat Euro's out performing a little bit up 33 But you know one of the things with the Dixie I was thinking is that if you actually look at the dollar index It was kind of getting right up to that hundred level remember about two weeks period ago Just gone. We've had some really awesome u.s. Data the dollar rallied Really aggressively we've got up to that kind of round that hundred spot We've just started to see it fade and now Actually with what's happened with more concerns not just in the u.s. But in Europe and globally about the potential spreading of the virus market in the rates area have started to bring forward Much more aggressively the idea of the Fed are gonna have to cut rates and markets are actually pricing in now To fed rate cuts by the end of the year and that's quite substantially different from where we were just Around a week and a half ago when that u.s. Data remember was really strong And it was priced more for kind of keeping in line with what the Fed's communication is Which is kind of a holding pattern for 2020 so a little bit of pairing back from you know If you zoom out a little bit and look at the dollars performance Excuse me over the last few weeks I think that underlines a lot of the currency movement here This morning, but obviously as I said, so I'm gonna look at the technicals as well that are in play Otherwise The u.s. 10 years up four and a half ticks golds up about eight and a half bucks And we're coming up to a relatively interesting range area Which on the daily pivots and the futures in gold would be around the R1 to keep an eye on for any further upside if we start to see further Most contagion if you like in the market onto these ongoing fears around the corona virus, so let's get into the headlines I do want to wrap in a little bit about the s&p with some of the commentary or some of the banks have been saying so I will Transition back and forth between a couple of charts, but to kick things off Let's look at this u.s. Identifies the first corona virus case without Outbreak ties now. I thought this was particularly interesting when I was reading this on my way into work this morning So basically this is this is a person being treated in California U.s. Centers for Disease Controls at the CDC They've said the patient doesn't appear to have traveled to China or been exposed to another known case of corona virus This is what's being coined as a phrase as community spread They're calling it where the virus begins circulating freely among people outside of quarantines or known Contacts with other patients and if you think about it if the market, you know, there were three things We were looking at if you remember that that piece that I Published on Sunday and we talked about in a briefing Monday morning three points. There was the spread outside of China There was the material impact on the numbers on the supply chain And then the third point was fear and fear is such a key one of what we've seen really Add the momentum or the fuel to the fire of the movies that we've had and this type Headline, I think could be perceived as quite worrying looking at it that way because this is talking about a virus Circulating freely among people outside of the quarantine areas that have not been to China or been exposed to any other known virus of corona virus So yeah, that's almost like the perfect storm in my mind where then you could see some real pick up in these numbers If that does indeed turn out to be The case so definitely I think this was quite interesting and you know again, this is just one Individual, but that's not the point. We're in a different realm now where it's not about the one time It's about us pricing in then the future compounding growth where it just becomes Exponential and and all of a sudden then people are already Fearing the worst and then that gets played out in the markets in the daily price action A few other things here just to show you that I thought were a bit more graphically Pleasing on the idea to understand what it is that's going on This is the number of new cases in the last week So this starts to look a little bit more between cases in China in blue on the bar and cases outside of China so as you can see there's been a steady incline almost like a Perfect inverse correlation here between cases in China have been decreasing Cases outside of China have been picking up But a lot of this is to do with the the kind of time as we know with the incubation period and with China having been the original The origin if you like geographically that Started what's about four weeks ago now when it originally kicked off And so that's kind of almost seen peak virus and there's now tailing off and hence the reason why Reports are that they're returning back gradually towards some normality Whereas in Europe is kind of it's just starting in this essence So you know the question mark is well, where does this red bar start to top out? I guess is the is the question but you can see you've actually tipped the balance and actually I know this chart is really rough in terms of the quality But hopefully I can explain it and what you're looking at here is you're looking at the beginning of the cases being reported So it's just going back to January 21st down here on the left now the blue bars of China the red bars are the daily cases of new confirmed cases, so This this graphic is wildly misrepresented because actually in China You're looking at thousands here, whereas cases outside of China looking at hundreds So I think to map one over the other is a bit misleading But the point is again, it's the shape of which the red bars are increasing that's important So instead of like for like comparison look at the direction And so this is what markets have been pricing this this this ability and talking to Alex about this this morning You know one thing I think is if you look at something like China You're looking at you know a Communist Party rule where you know when the state want to get something done Well, they they definitely go about their business in a in a very Let's say they're very tight on their implementation of their rules in that sense and so Containing one country under one policy is Probably you would imagine more easier than trying to do Cross-border cooperation of different countries when you start talking about an euro area for example Well, you've got multiple countries all looking to then operate independently, but in cooperation with one another You've got to think that there's going to be many more opportunities for You know issues to occur in that sense in terms of slipping through the cracks and then the ability for the virus to spread So definitely I think that's why the markets have been trading that they are and you know Another thing that was interesting this morning was well What are the big banks thinking now about where do we go from here? you know, there's a lot of Obviously buying the dip mentality that has yielded some fantastic returns over the last few years and you know Whenever we get a big pullback like this, there's always that temptation to think wow I just want to get in and this could be a perfect opportunity to ride it all the way back up again And let me just transition my screen here to the S&P 500 I'm going to talk you through city group and Goldman Sachs and what their analysts and strategists have been saying Overnight in their latest research report. So this is the S&P 500 on a daily continuation chart And I've marked it up so you can see the corona spread outside of China This is that big move that we've had this week now There is a couple of nice long-term technical levels here. You've got that The trend line that's been in play Multiple times and actually if you look where we are at the moment Although we've kind of had a brief momentary glimpse beneath that level Pretty much to touch bang on the 200 DMA We have bounced back and we sat right back on that trend line again at the moment So I think today and tomorrow session still is pretty key here as to ascertain Do we have another quite substantial move to the downside? And so where we close here on these daily candles is probably going to be very important now on the downside The 200 DMA and you can see this horizontal line, which was the previous all-time high We retested it again here, which was back in September of last year It acted as a bit of a support point for then the eventual push-up. So here is also a key area So the 200 DMA and that line in there in the S&P futures 3023 around that mark now what a city saying well City are going one step further. They're saying a lack of clarity on both the virus outbreak, which yep Absolutely agree. It's a super difficult thing to try and quantify And I think anyone who starts putting out there a specific date of peak virus or how what the end game numbers will be I think it's a little bit pie in the sky trying to trying to do that So I agree with that point the second point they make and which is quite interesting because I think it's valid Is they say Fed monetary policy now? We had feds Clarita who's the vice chair speak just the other day and you'll remember what feds Clarita was saying was It's too really early to make any judgments about the best course of action to make from a policy point of view But the longer the feds stay off Then the less than the market can think that they're going to step in in order to prop the market up all the more reasoning then that you can maintain the short knowing that the Fed aren't going to come in as the kind of The plunge protection team almost in that sense You know the Fed from their point of view are very Apprehensive because they do not want to fire their bullets too soon. They want to keep the ammunition back And so it has more value than if this route becomes more deep in the stock market So what city are saying is it if you're going to buy the dip they're calling for? 2730 to get in let me just remind you where we're trading. We're trading above 3000 right now. So there's what city are saying is you've got to have a correction You've got to go to the 200 DMA. You've got to go another 10% From the 200 DMA, which we bounced off here in the session so far today in the Asia Pacific Mars So from top to bottom That's 20% from the sell-off that we've had this week and that is by definition Then not a correction, but a bear market that you'd be looking at now Why have they picked 2730? Well, again, there's some pretty clear technical points to the the relevance of that level That brings us right back into the 2019 March and also June that double-bottom support that we had And so yeah, are we gonna get down there? that that's a bold call you would need to see in my mind a much bigger Acceleration in those cases across mainland Europe and specifically in America I think that needs to take hold and then you need to get a pretty it will need to be quite a rapid move because at that point An acceleration to the downside of the tuna 20% or the Fed have got to act at that point So yeah, they're Goldman Sachs. What are they saying? They're the other bank that came out overnight They said without more clarity on stabilization of global growth It seems too early to add to risk tactically now what again I think it's quite interesting here is if you were someone who's been buying the dip on prior occasions Imagine how you feel now about buying the dip because you probably would have come in on Tuesday and thought Well, the Dow sold off a thousand and thirty two points It's got to be a buyer the dip right and then it drops another nine hundred and you've got badly burnt now Come Thursday morning city in Goldman come out the city says, do you know what? We've got to go another 15% from current price. So how do you feel about buying the dip now? so if you think about then from a Kind of sentiment points of view if no one's willing to step in and buy the dip and there is no dip buyers You've got a bit of a problem then and that means that you could see another leg lower Now this is also ratified by the fact in the options market Similarly it's showing signs that people are showing more nervousness and a lack of stepping in Predicting further volatility volatility may occur now We all know that the volatility the VIX has surged to levels seen Not seen in more than a year the VIX for those who it's a new concept tracks the implied volatility of the S&P 500 over the next month based on out-of-the-money option prices and it peaked above 30 On Tuesday now the VIX curve is in so-called Backwardation with the March futures contract trading about one and a half points above April's which is a departure basically from the usual upward slope of the curve So typically when the front month of the VIX curve inverts the rest Remains pretty flat and that basically is a sign that we're going to go through an episode of volatility and a return to normality This idea that we we see this blast of of negativity and then recovery However, the April VIX future is closed as much as 1.3 points above maize During this pullback and that's the biggest such backwardation between the second and third month contracts Since the volatility blowout we had in Feb of 2018 and what this is basically saying if all of that If you're not familiar with all that terminology is that people are expecting more Volatility over a longer period. So now you've got all of these banks. Does that start to persuade or? Change market sentiment about the longevity of this sell-off certainly the option structure would suggest that is the case so Now tracking these numbers if we do see it all of a sudden a bit of a pop in America and the most frightening thing of Course was earlier this morning that first case about USI authorities identifying That hasn't had any ties to an existing outbreak or Exposure to China if those numbers start going north and then we start seeing other areas like for example the city of London And numbers there start ballooning. That's the trigger point then and we could see another violent episode and Another thousand point thousand point, but these things would all have to happen Rather than us just hitting it blindly wanting to get short at this point So the other final thing I wanted to show you Alex showed me a really interesting technical Repetition that's been happening in the down check check this out. It's quite impressive really and if I put a Fib retracement, I'm gonna I'm gonna go back to Here so this is the dip that we had at the end and that violent sell-off in Q4 of 2018 Take it up to the high then that we saw when we had the best here Remember in Q1 of 2019 best rally in three decades and look if I put that fib on there Check out that area Right there perfect bounce on that fib on that 38 to retracement And then if we do another fib level So if I if I get my fib tool again, I go from this from the same point was it Alex So same point again go to the next area here and You can see once again Exactly the same bounced pretty much to the tick on the same fib retracement And then look where we are as of right now same point again go up to the all-time high Right on the money of where we are again look Literally to the tick it's hit in the overnight Asia-Pacific session. So one two three that fib Retracement has been right on the money on every single occasion on that point. So Yeah, today then all the more technically important It is because that's the Dow go back to the S&P and that 200 DMA is key as well As well as the close on that long-term trend line So yes some really interesting setups coming up for the sessions ahead Certainly by the end of this week, it's going to be interesting and I'm going to be Shocked if people are going to feel appetite to leave anything on over the weekend I guess the only one play where you could do that is gold and Much to will the Lucy's delight Goldman Sachs and every other bank obviously Readjusting their calls goldman's now going for 1800 bumping their call up by another 200 bucks And again as we've said many times in our briefings this week It's just the best cleanest form of exposure on the risks on the table Particularly with a yield in the US down at record low levels. I just think all the more so it makes gold a more attractive short-term investment And yeah, well, it's just saying it's not enjoying this week so far and you know, perhaps a byproducts of just how aggressively it rallied in the week before when it had that kind of meteoric rise through $1,600 a little bit What I could say to will to make it feel a little bit better I think it's a healthy correction there in order for another push-up Is kind of my kind of view with gold I still remain bullish gold and I think now we've got our heads above 1600 I think it remains there for the time being until this Outbreak outside China of the virus starts to stabilize at least Final couple of things to cover From the China's point of view China central bank continues to ensure ample liquidity through targeted reserve requirement rate cuts You would absolutely expect this to be the case. This is not new This is just them committing to in storing stability to the system. Donald Trump looking to diffuse coronavirus threat and boost markets Why is the market falling? It's the Democrats, of course It's nothing to do with the virus But you know, this is not going to move the market. This is just Trump, you know, this is kind of again a strategy to try and Restore some sort of calmness to consumers and markets and that the US are adequately equipped to counteract That quite surprised headline we were talking about yesterday from the CDC about it's not about when It's not about if but when the coronavirus eventually does start to the numbers Accumulate in the US finally not going to talk about this much because it's much more down the pecking order of things The virus definitely more dominant, but today the British government handing over their initial Mandate in regards to then kick off negotiation was with Europe and the point being is they're on an absolute Collision course at the moment over trade couldn't be further apart But this is absolutely as we would expect at this point of the timeline given the Transition period of Brexit so far. All right Sam's going to head over while he does a quick look at the calendar for today Now this morning not too much going on this little cluster of European data is not going to be market moving Although it looks quite interesting it It never really is So then that takes us into the US session You do have the second estimate of Q4 US GDP got durable goods from the states core PCE prices Weekly jobless claims pending sales or pending home sales quite a few things coming out There is also quite a few speakers You do have Christine Lagarde speaking at a finance event text will be released at a bit 945 London time this morning You've also got well a whole cluster of ECB speakers in fact, so make sure you have that calendar to hand And then you've got a seven-year note auction coming out the states later on With also some Italian supply this morning So that's it from me any questions on the video when we publish this on YouTube particularly on the VIX and Kind of what we're talking about with backwardation for example Absolutely can explain more about that. Just leave a comment if you'd like me to no problem at all or anything on the The things that I've covered. Okay guys hand you over to Sam I'll speak to you later on. Thanks Hi guys. Good morning. Hope we're all doing well last couple of training sessions of the week Let's get under underway My job's been done there by and and Alex with the the fibs which look great. I have to say on the On the Dow there Gotta have them on for sure. It's this is being such good reactions to those points I mean, I guess you would argue at each of those levels we weren't In a situation anywhere near as bad as this and I think We all believed that the Fed will continue to be dovish and that the trade deals were going to get done Do we believe that the virus has been priced in yet? We'll be too sure. However, if I just Remove some of Ant's artwork here. Let's leave that 200 moving average on there for the S&P because of course Let's keep you know having a look how that reacts every time we come through It's it's other than getting really choppy towards the back end of 18 It's it's a level you've got to have on as an area of support I think that trend line that I just removed that was from that infamous trend channel Is a good enough guide going into the back end of the week, you know, are we going to close above or below? Is very important I would say and if we do get a bit above there We might get a nice rally to start the the week perhaps However, I have said would you want to hold anything over the weekend? I'd be very surprised if you did Looking just below where we're trading this is still in the daily chart You can see that 200 day moving average is very close below where we're trading here So keep a watch on that if that's to go or the next key level that I would be looking at It really comes down to around 30 20 You've got a lot of highs here from the summer last year just before China devalued their currency And we had obviously a big correction big drop I should say there in August and then September highs before we broke through found the support there in November So that point would be the target area if we were to drift lower Let's put this on to 60 minute here and you can see the low that we had from Let's get the pivot on yesterday is this holding up as an area of resistance as such However, you know the these markets aren't what they were Two three weeks ago. So, you know stops do need to be a bit bigger Therefore, you know, the size doesn't have to be as big for the trades to be comparable Other key levels to be aware of I quite like this point here 31 17 is a level of resistance. I'm expecting a bit of a range bound day to be honest I think if we can push higher and I mean like towards the pivot, you know, these areas here I would like to get short again. I don't necessarily think we get up to 31 50s But that should be a point of interest for sure Keep a watch obviously on that low and just be aware that that moving average the 200 days Literally just below where we are trading. However, a break of that area 30 19 could be the point to keep an eye on oil. Let's have a quick look. It's And I was just I was doing a trade review for the guys here yesterday I did mention to them that I'm not going to talk about it again, but I'm going to Where I had a short overnight yesterday Placed I don't really like trading overnight without monitoring it But a short on the retest of what would have been two days ago is low It didn't fill me because of the spread on The the platform that I was using And it came all the way down Which obviously I'm not bitter about but let's get that weekly trend line on here for oil Because we're near some very key levels and we have broken At the moment or we're looking like we're going to break on that week as well Let's get it from that low 2016 That double bottom infamous double bottom around what was it? 26 is yeah Break of the low the a break of that trend line as that came in. We're now trading if I draw this on I'd say the next point of interest towards 47 bucks. So we're trading what 48 At the moment how close is that now you can see it's about a dollar below So I'll be keeping a very close watch on that if I put this on to the day Lee chart and let's make this a bit bigger. You've got some other support just where we have hit that low So this is the importance of that longer time frame, you know If you don't have the daily chart on you can't see that the low that we just had was actually the second of January last year's high Below there really would favor 47 bucks to get traded and likewise with with With the s&p and in terms of trend lines and be the guide if you are looking to You know be the hero and catch a falling knife Why not just be late to the party and get in above these these levels? I think 50 50 yesterday was Was somewhere I marked up as a pretty key point for a guide and we couldn't get above there We drifted lower and now we're stuck within these this new range. So for me the three areas of interest one two three And obviously if you want to make 50 50 up there you can those would be the areas where I'll be potentially looking to trade Take it more intraday than fine. You've got really this call it a zone around 48 30 20 that kind of point Those lows break through we test that could be a nice little area to have marked up there as well Euro moving over to the currencies. We'll have a look at gold getting short squeeze pushing on Could identify You know these previous levels here is a place to have got into the trade and to be honest on paper It looks fantastic, but the dollar is weak here in the euro, which has been on such a big push lower Has recovered here. I just think a lot of these shorts just getting squeezed here I would identify all these other lows as potential areas to get in But the way this euro is going it seems like 109 88 on the futures could be Well achieved today by the looks of that So if we are going off that, you know, the You've got that key level just marked up there around 109 39 on the futures Keep a watch. Should we come back down to that? But look at this the euro is really having decent pushes consolidating for a bit and then going again So, yeah, I mean that next level up here You'd say is a good enough place for people to take profit We're a long way from the the trend channels of this this move lower You know, I'm still kicking myself really not getting in on New Year's Eve For the short for the euro, which was you know the top of that trend channel as we came back down So that's a fair whack away But if we could perhaps get up towards 1010 21 It could be enough could be interesting enough But I guess we're a more medium term short to attack those lows the year Should the dollar start to strengthen again as I mentioned the pound previously was Was was flat but this euro strength that's just pushed on in the last Well time we've been doing the briefing has helped the the pound here go as well And we're now above that high of the day keep a watch really just Seven ticks or so above you got that high of resistance area, which you can see is fairly well respected So 29 57 there for for the pound. I think it's worth having marks up on the chart As well coming back down to that pivot. I mean it's potentially worth a little trade I would say you can see here We're previous high come back at area support risk was not too bad On that quick look over at gold just to to wrap it before we have a look at the deck so you can see It's it's it has been tricky. I mean yesterday's low Held fantastically well, but it was coming down quick at that time We're now pushing on and I said this yes this time yesterday about that. I think it was 60 1660 point six give or take A couple of center for me. That's the only area where I'm looking to get long on a continuation above Yes, if we break the high of the day, but you've got then yesterday's high You got our one you got a lot of resistance around there So for me if 1660 goes and it's the right, you know conditions in the market for me. I like it up towards 1672 But for now it's choppy, isn't it? There's you know, it's it's unpredictable Which which way this market's going to go intraday just when you think it's going lower It if I holds up it's range bound should we say over the last Two and this morning's trading sessions. I would say have a quick look over at that tax Um, okay. It's down in the last 15 30 minutes This market put this on the day is being under some serious pressure It really has and I think you know, I was watching because I've you know, I played football last night and got back and You know, I can never sleep after playing sport and I was watching trump's speech at 11 30 Um, and the markets just was just one interested it weren't interested and he he was just rambling on He was rambling on I think he was taking great pride in In being number one on the list of countries that can deal with it You know showing the piece of paper to everyone not really saying how they're going to deal with it if there isn't even a problem Um, but the markets were sort of turned Around they're all on you're already under a bit of pressure after german health minister comments yesterday They haven't recovered since that but you know looking at this deck here. You've got these You know the importance of the daily chart is where I was going with all of this and you just you do get bounces from these levels And while I don't necessarily think we've seen the low for now If you're you know trading intraday, you're not going to want to hold things overnight Understandably take profits when they're there look at this support. It's just fantastic really really is So therefore, you know, you're looking at a break of that then where's the next level? Well, really opens up a bit It really could open up a bit and that's equities as a whole if we do get down to these lows again And get the push through Well, there could be some some further moves But not necessarily expecting that today for the decks you can see the importance of that low from two days ago It's acted again as the high today Can we get back up to to 12,880? Not too sure. I did have some shorts waiting there. Yes, they didn't quite get filled for straightening But for now I'm expecting similar morning to yesterday Perhaps just drifting higher but getting an opportunity then later on in the session for a decent short is the way I'd be looking to play As usual any questions, please do let us know a couple trading days left of the week I still think it's going to be one filled with opportunities But again, that doesn't mean you have to be in something All of the time. Hope you all have a good trading date and I'll catch you all later on Okay, I'm gonna show