 Good morning, and welcome to this week's Monday market webinar with me Michael Houston in the absence of David Madden who's on holiday this week and It's the 26th of March. It's the last week of the third month. So we're coming to the end of the quarter as well so the end of the end of the week and sorry end of the month and end of the quarter and Given the declines that we've seen at the end of last week is quite likely that we could well see a negative quarter for the S&P 500 and it will be the first negative quarter for the S&P 500 since 2015 so that's quite a significant run of positive Quarters that's finally coming to an end. It's also likely to be the second negative month, you know, right? so I think the big question I think that Most people are wrestling with at the moment. Certainly. I'm trying to figure out Whether or not the declines of the past couple of weeks are likely to prompt a rebound in the same way that they did in February When we found a bit of a base or whether or not We are in the cusp of potentially further equity market declines Obviously once I've got the disclaimers out of the way I can get started on the actual Analysis and look at the key chart points and also I think the key events that I'll be keeping a BDI out for this week So we're going to start With the Nikkei 225 because even though we broke below the February lows We've seen a decent rebound and I think when we looked at the end of last week. There was a I think there was Quite a decent chance that we're expecting a significantly lower open here in Europe today The fact that that didn't happen I think is largely down to the fact of an interview that Treasury Secretary US Treasury Secretary Steven Mnuchin gave to Fox News on Sunday and I think you know when you actually look at the overall negativity Surrounding the declines that we saw on Friday. I think there was a big concern that The ramps up rhetoric from the Trump administration with respect to tariffs on Chinese products particularly 25% Tariffs on 60 billion dollars of Chinese industrial exports in retaliation For allegedly forcing foreign companies to transfer technology and other intellectual property Was I think there was a concern that we would see significant blowback from China on those tariffs their response was fairly nuanced and fairly restrained and I think that did give some confidence that maybe This was potentially a negotiating strategy and certainly I think some of the comments that we've seen Coming out from not only US Treasury Secretary Mnuchin that he was cautiously optimistic That there would be he would be able to come to an agreement with his Chinese counterpart Who is the Chinese vice premier you he he's President Xi Jinping's most trusted economic advisor? that There could be a mechanism whereby the the Chinese surplus with the US of 375 billion dollars which President Trump is keen to get down by around 100 billion dollars There is some optimism that there could be some progress on this over the course of the next few days And that's really I think why we've seen the rebound in the Nikke But more broadly I think the rebound in European markets in general South Korea also gained an exemption to the Trump tariffs becoming the latest in a long line of US counterparties that had gained an exemption on the back of the EU who gained an exemption at the end of last week so I think concerns about an escalation have diminished and I think that's why you're seeing a little bit of a rebound in Equity markets in general, but that doesn't really I think Draw a line under the subject because ultimately there's still an awful lot of concern I think about what's going on in the tech sector. I think if we look at the tech sector the way that has Behaved over the course of the past Few months and years the tech sector has driven a good proportion of the rebound in the S&P 500 and equity markets in general over the course of the past two years and Obviously these concerns with respect to Facebook The Tioration and sentiment around that particular stock further Regulatory oversight there could well impact on some of the some of the Some of the rally that we've seen in that particular stock and I'll be looking at Facebook stock as well And the fact that that's declined quite significantly over the course of the past two to three days And actually could be on the cusp of further declines going forward So we'll be looking at that. We'll be looking at the broader tech sector in general But before before we get to that, let's look at some of the key Chart points on the major Ben benchmarks. So at the moment with respect to the Nikkei, we've seen a decent rebound on that today I think the next resistance level on this particular one is around about 21,000 20,960 We have broken below the 200 day moving average And I think that is significant because ultimately when we look at across when we cross when we look at across the index spectrum The only indices that haven't as yet crossed below their 200 day moving averages are the US ones So I think the US markets are the last line of defense when it comes to further declines Inequity markets in general and we can really see that no better illustrated By what we're seeing in the S&P 500 and I talked about it a little bit this morning When I did my daily periscope update, which I try and do between 8 o'clock and 9 o'clock in the morning And we can look at the 200 day moving average and we can see the significance of that particular support level By the way that we we saw a significant rebound off those off of that level in February We've retested it on Friday. We've rebounded from it today and the likelihood is we're going to see a very positive US open when US markets open in just over two hours time For me, I think to see a significant stabilization and sentiment for US markets Is we really need to see a move back above 2670 which coincides With the peak on Friday, but also this series of lows that we saw through here at the beginning of March now going back to a slightly longer term chart on the S&P 500 we can see How well this particular index has done over the course of the past few quarters as we can see here We've seen a very very strong run against the likelihood is we're going to see a negative quarter for the first time Since the middle of 2015 if we look at it on a monthly basis over the last five years again We're on course for the second successive monthly decline the first time that we've seen a significant consecutive session of monthly declines Pretty much since the middle of 2016, but again those were those fairly modest. I think we'd have to go back to 2015 to really see significant declines in the S&P 500 for quite some time so You know look at looking at the longer term picture. I think there is a Significant change in sentiment we can see that here on the actual Index there, which is borne out obviously by this particular chart here And it's a similar sort of story on the on the US 30 as well though I'm a little bit reluctant to sort of really take much of an indicator From that there simply because of how far away the 200-day moving areas is relative to the S&P and Given how heavily skewed the Dow is relative to the overall benchmarks What we've also seen here today is once again a rebound on the German DAX We managed to hold above those 2000 those February lows that we saw and the March lows as well and again We've seen a significant rebound so at the moment. I think it's the S&P and the DAX that are Really putting a flaw under equity markets all the time being with respect to the DAX What I would hope to see is a recovery back through 12,000 to signal a little bit of a stabilization But overall I think there is a warning sign here. We have seen a Strong move lower a rebound a strong move lower a rebound and then a strong move lower So every single rebound has been slightly below the previous one which suggests to me that there is Reducing or declining confidence in the sustainability of the equity market rally that we're seeing at the moment We are starting to get a little bit sticky in the overall In the overall I think confidence of where equity markets can go to next and does that mean that we're going to start to roll off a cliff You know, I'm very reluctant to sort start basically lobbing those sorts of adjectives around but certainly in terms of the Rolling over of the 50 and the 200 day moving average not only on the DAX But also on the broader indices in terms of the 50 day moving average Momentum is now starting to favor the bears relative to the balls So while you may hear a whole raft of people going Making the positive case for stock markets What we've seen over the past two to three months would appear to suggest that we're it's going to be a long haul back To suggest that we're going to see a really strong rally in the short to medium term I think if anything it's going to be a slow along slow grind higher and Earlier this year. I suggested that we may well have seen the highs for the year I still stand by that. I still think there's a distinct possibility that we're likely to Continue to be in a cell a rally type mindset over the course of The next few trading sessions. Certainly what we're seeing here with respect to the footsie 100 That does appear to be fairly positive. But what I would look to see here I think is a consolidated move above the highs that we saw on Friday So essentially what I'm looking for is for us to close well above 69 60 to suggest that we're going to get a retest of the 7,000 level and the 7,000 And get a move to around about 7,020 we do appear to be looking a little bit over ball and Oversold rather What am I saying? We are looking a little bit oversold which would appear to suggest that we are due a little bit of a rebound So I think as we head in towards the end of the quarter and the end of the month I think there is scope for a little bit of profit-taking and Ultimately, I would expect the 200 day moving average to hold in the shortest medium term on the S&P and that In all likelihood Is likely to prompt a little bit of consolidation and a little bit of a rebound over the course of the next few days We've also got host of key Fed speakers scheduled to hold forth on Monetary policy over the course of the next few days now that the Fed meeting is safely out of the way I still think that the likelihood is that the Fed is going to all Fed speakers. We've got Dudley Mester Randall Quiles and Bostick who are all fairly I think likely to remain fairly positive on the case for Further US rate rises over the course of the next few months Now if we look At the possibility of a June rate rise That still remains Fairly positive. I think with an 80% probability. We can see that here WIRP on the Bloomberg There's an 80.9% possibility of a Federal Reserve rate rise in June so the case still remains for a Rate rise in June which would be two I'm still not convinced of the case for four Despite what you may hear from a number of eminent commentators. I think that still remains a fairly tall order I think much will depend on the Inflation data that we've got coming out of the US and we'll get some indication on that later this week if we look At the market calendar We can look at some of the key events that I'll be keeping a close eye out for later this week And the main event that I will be keeping a very close eye on is not so much the GDP numbers Which are due out on? Wednesday We're expecting a slight improvement to fourth quarter GDP to 2.7 If we look at quarterly inflation That's expected to tick higher from 1.3 to 1.9 But it's really the monthly PCE numbers that I'll be paying particular attention to and these are out on the 29th And it's this number here the PCE core price index And that's currently at 1.5 percent and as we all know the Fed target is for 2 percent. This is the Fed's preferred measure for inflation and We're expecting a modest improvement to 1.5 9 percent around about 1.6 So again By the Fed's preferred measure of inflation that it's still for it's still fairly Subdued despite the fact that ISM surveys prices paid surveys continue to show Price pressure Multi-year highs. It's also important. I think in the context of this particular debate is personal income and personal spending one of the things that I've been a little bit concerned about is the fact that US retail sales have to continue to remain fairly weak over the last two to three months despite Fairly high consumer confidence levels, you know, and there's a significant divergence there between the two Which don't to my mind make an awful lot of sense So we look at personal consumption that still remains fairly weak not point to personal income not point for Suspending patterns still remain fairly subdued retail sales remain fairly subdued Despite the fact that the US consumer is 70 percent of the US economy So that suggests to me that ultimately While the US consumer is telling us one thing there is a concern if the Fed hikes rates too aggressively That could tip the US economy particularly in the consumer on the consumer side It could curtail retail sales spending even further And I think that's something that while Fed policy makers may not acknowledge it now They may have to acknowledge it further down the line So what does this mean for the potential for further dollar weakness because certainly? I think in terms of where the dollar index has been We're not really getting any significant clues as to where the US dollar is going to go to next And that's really borne out by this chart that I'm showing you here Regular viewers will know that I've been watching this dollar index chart for quite some time We still remain in this sideways channel that we've been in Since those early February and those early January lows We haven't really broken out of that despite the fact that dolly N has broken lower Euro dollar is still in its broad range that it's been in for the past three to six months And the likelihood is that it's likely to remain in that range We I think you know with respect to currencies. I've been very very surprised How how how benign they've been and ultimately the only thing that has really changed is the fact that dolly N's broken below 105 20 which suggests to me that if we do get a stronger yen That's likely to change the dynamics with respect to how markets are perceiving risk given the fact that the yen Generally tends to be perceived as a safe haven currency So let's look at the currency Let's look at the currency picture because ultimately what I've seen here is on an on a technical basis The break below 105 50 105 40 50 has potentially negative connotations for the dollar yen Which would suggest to me that I think the bias has shifted ever so slightly towards Dolly N heading back to 104 30 initially and that should act as support that 20 30 level But unless we can get back above 105 50 here And let me draw that in for you this particular level as well as the cloud resistance the chimoku cloud which is Basically pushed and weighed on this move lower while we remain below this level here Then ultimately dolly yen remains very much a sell the rally type of trade so Looking I think on the four hourly chart We can see that we're starting to turn higher So I think there's a good chance we could get a move back to around about 105 20 30 105 40 But it's going to I think it's going to be very very difficult for dolly end to move significantly above that in the short to medium term so Looking at the overall picture for dolly end very much a sell the rally type of trade while we're below 105 50 Looking at the pound against the dollar. We're looking For potentially further sterling strength, but and there's a significant caveat to this particular Trade here. We are running into a huge area of resistance on the pound against the dollar And I've talked about this previously as well this 200-week moving average which currently comes in Round about where we are now actually you're in between 142 30 and 142 50 So I think if we're going to see further gains in cable Then we really need to close above this 200-week moving average to really start to push on towards 145 and 146 I still remain fairly constructive on the pound But at these sorts of levels, I think you have to be overly cautious about being aggressively long I think at the moment The momentum is higher We are looking a little bit overpought on the short term and that would suggest to me that we could well Drift back down to around about 141 while we're below this trend line resistance here So we could go back to 142 30 142 40 in the short to medium term But I think it's really going to struggle for momentum anywhere near 143 in the short term What could change that however is how euro sterling behaves over the course of the next few sessions? And that does appear to be showing some signs of rolling over but again Here we're in a range And I always think it's very dangerous if you're looking to sell breaks When you're looking at euro sterling in this sort of prison because around about 86 90 87 Over the course of the past six months. There's been a steady stream of buyers for euro sterling So it's going to be unlikely that you're going to get an aggressive move lower Unless we really do take out the June lows that we saw last year at around about 86 If we look at the number of times we've come down here and found buyers There's there's quite a few and that would suggest that it's likely this trend will continue We'll get buyers around here and we'll get sellers anywhere towards 87 50 87 60 and maybe 88 But ultimately I think looking at this chart here. It's very much a range trade until such times as any evidence to the contrary Same sort of thing applies to euro dollar again, we've got a Very very big resistance level above 125 We've seen a decent rebound off the one twenty two and a half level here We can see that through here as well by the distribution of these candle charts or these these these lows through here there and There and there had a little bit of a break below there, but ultimately it wasn't sustained We're starting to look a little bit overbought on the fall before our chart around about 124 20 124 30 Which would suggest to me. There's a little bit of resistance anywhere through here But even if we do get through there, we've also got 124 30 on the top side. So again, I think Looking at this. It's very much a range trade on the overall euro dollar And even if we do break through 124 20 124 30 We've got a big area of resistance above 125 And that's even before we start to even think about the 61.8 Fibonacci retracement level from the 2014 highs To the lows that we saw earlier this year ultimately, it's very difficult to argue for a breakout of the range Given what we're seeing with respect to the macro picture You'd need a significant catalyst to suggest that we're going to move higher. I Don't think at the moment. There's any appetite for that to happen and Then the news flow doesn't appear to suggest that and as we come up to Easter I think the I think the appetite for any significant new aggressive positioning is likely to be fairly diminished as we head in Towards the end of the week and I think that's something that we will have to bear in mind as Easter comes out I think it's very it's going to be very difficult For anyone to take on any new aggressive posture ahead of a long weekend as well And that needs to be born in mind as well Let's look at dollar CAD because that's showing some Significate that's showing some interesting patterns as well We've seen potential for a little bit of a topping pattern here. Is this the beginnings of a head and shoulders formation? It's certainly looking very interesting. We could get a rebound back to around about 130 But it does appear to be some evidence that we could be Starting to potentially top out on dollar CAD and head a little bit lower on a break of this neckline support that I've drawn in here What else do we need to look at I think the US Treasury is quite an interesting chart as I'll keep an eye on that To 17 980 a big area of support through there. We've got a slight rebounding yields off that level there Which at the moment is helping support dolly in push higher so Don't there tends to be a decent correlation between those two keep an eye on that We've looked at the Germany 30 we've looked at the Nikkei 225 We've looked at the footsie 100 Please feel free to ask any questions if there's anything that I've missed out Let's have a quick look at gold I'll come on to Facebook in a minute because that's actually an interesting chart and actually could well Suggest that we could be on course for further declines there But looking looking at the gold price We're looking to approach resistance from the 2018 highs currently around about 1350 1355 We can see that drawn in through there Just yeah, 1355 there or there abouts on the current daily chart So that's coming into a key resistance level there and Brent crude We saw a really decent rebound in Brent and WTI last week. What was notable Was we weren't able to take out the previous highs From earlier this year in January and I think that's significant. I think the inability to take out those highs Does appear to suggest that even though we have seen a slight change in sentiment with respect To crude prices. It's going to be very difficult in the short to medium term To suggest that we could get a move significantly higher So one of the reasons why we got that spike higher last week Was that Saudi Arabia might look to extend the production cap into? 2019 we've also seen the appointment of John Bolton as National Security Advisor Now he's a renowned hawk on Iran and that's raised concerns The US might look to pull out of the nuclear deal Which would pave the way to blocking Iran's ability to explore export to the global oil market now That's really significant because Iran is OPEC's third biggest exporter behind Saudi Arabia and Iraq at the moment In the short term, I don't think there's any likelihood of the US calling out of the Iran nuclear deal But I would expect to hear more chatter on that once John Bolton takes his place as National Security Advisor At the beginning of April he doesn't take up his position until the 9th of April So that could be a story for next month in the short term I don't think it's a story for this month and given how close we are to very key resistance level on crude oil it's 50% of the pullback of The decline from the 2014 highs to the lows that we saw beginning of 2016 That 71.65 is going to be a tough nut to crack on Brent crude on WTI It's a similar sort of story Again a very key resistance level, but also Below the 2018 the January 2018 peaks that we saw early around about $67 a barrel 6680 $67 a barrel so To wrap up, let's have a quick look at this Facebook Chart which I posted on the chart forums last week It's a very significant break below What could be a potential reversal pattern, it's a very messy I would I would grant you that it's a very messy Head and shoulders breakout, but I think now that we've broken below 170 Then I think there's certainly potential For us to head back to around about 142. What I've done with this is I've taken the peak here And measured it from the break below this Horizontal support and resistance line here. We haven't as yet been able to get back above it We're also below the 200 day moving average Which would suggest that if we do get a rebound in Facebook shares around about 165 as long as we stay below this Resistance level this previous support level, which is now resistance level Then we could we'll see a move back to 152 and potentially 142 Which is our minimum price objective for this move and this break lower here So certainly in the context of while we're below 170 Then Facebook could well head back towards 142 on a measured move basis on this breakout Breakout below here and if Facebook Moves lower than the thing. There's a good chance we could see Further tech shares come under set come under pressure as well looking at Apple. That's currently on support of around about 164 165 there or there about so keep an eye on where we open there We're also on the 200 day moving average for Apple. So that's going to be an interesting little move And if we look at Alphabet as well Google by any other name that's also coming in Close to it's 200 day moving average as well as obviously looking at this horizontal line here through here Tech stocks in particular. I think are going to be I'm going to be keeping a close eye on these various levels on Alphabet on Facebook And on Apple over the course of the next few trading sessions because they could offer significant clues as to where the NASDAQ could go to next Okay, so it's 1245 unless anyone has any further questions or wants me to look at anything that I may have missed out on Like to thank you all for tuning in and If you have any questions in the interim between now and Friday, you can always find me on Twitter and use an underscore CMC Otherwise, I'd like to thank you all for tuning in today and if I don't speak to you beforehand have a great Easter and Speak to you all in two weeks time or back in two weeks time There'll be no Monday market webinar on Monday next Monday because it's Easter Monday and we'll rejoin on Monday, I think the ninth April. Thanks very much and have a successful trading week