 Good morning, welcome to CMC markets on Friday the 5th of February and as quick look at the week ahead beginning the 8th of February I'm certainly been an interesting week contrasting from the Reddit inspired retail sell-off of last week and by and large markets appear to have recovered some or most of their equilibrium After the big sell-off that we saw at the end of the previous week So as we come into the second month of 2021 I think the big question here is whether or not we really revisit or see new record highs on the S&P 500 the DAX and and similar sort of stabilization After what has been I would I would suggest as a fairly mixed start 2021 It was a quick sort of recap We started the start of the year on a fairly good note fairly positive note we then spent the rest of January sort of giving most of those gains back and obviously we've seen the game stop inspired sell-off Which now appears to have subsided US markets extended their rebound This week for the fourth day in a row yesterday on Thursday and It would appear that the recent fallout from the Reddit game stop inspired sell-off Has continued to fade. We started the week with silver pushing up towards $30 an ounce those gains have since pretty much evaporated and I think what's taken over this week is once again the topic of economic fundamentals, particularly US economic fundamentals and we can see particularly in the way that the US 10-year Treasury yield has behaved over the past few days the Bomb markets starting to price it certainly starting to price in a fairly decent Economic recovery and we had the Bank of England this week They pretty much took negative rates off the table. In fact, that's the way I read it I mean, obviously they were careful not to do it completely But ultimately my skepticism over negative rates Thus far does appear to Have panned out and I think it's going to take something really Something really bad a black swan type event for us to get negative rates later this year Simply because the direction of travel when it comes to the vaccine rollout plan is By and large fairly positive And one thing that I have noted This week is the way that I will not just this week over the course of the past few weeks and months is how The move higher in US 10-year Treasury yields has mirrored the decline in the gold price over the same period of time And I'll I'll show you that we've got obviously the lows in the US 10 year around about 0.51% and now 1.4 1.14 if we look at The gold price and we just pull that off bring up the gold price there We can see from the peaks in early August, which is around about the lows of where the 10-year Treasury was We're pretty much back down pretty much back down there again in terms of US gold prices and we can see that with this chart here Similar sort of peak in the gold prices coincides with the low in US Treasury. So I would suggest if we get a move higher Through 1.20 in the US 10-year yield and we could we'll see gold pushed back below that 1763 area that we saw All the way back in November there So there's there's definitely something going on there between gold and US 10-year Treasuries And it's not hard to see why as Treasury yields what as Treasury yields rise the attraction of owning gold diminishes But that's by the by Let's look at why equity markets have done thus far this week. And basically FTSE 100 has been the ugly sister of Equity markets this week. It's really really struggled to really Make any sort of significant rebound relative to its peers and a large part of that is obviously disappointment Over earnings from the likes of Royal Dutch Shell BP and Unilever they make up a significant chunk of the market Capitalization of the FTSE 100 that being said You know my case for the FTSE 100 remaining fairly well supported still remains intact We remained above these lows that we saw back in December bottomed out around about 6300 and while also the performance of the pound is Lightly to act as a bit of a drag on the FTSE. I don't really expect that to prevent a move back Towards these highs that we saw all the way back in the early part of January Ultimately for me the direction of travel is everything Regular listeners of these videos will know that I'm very much Momentum driven trend driven higher lows higher highs lower highs lower lows, so It's all about what the peaks and troughs are doing for me And yes, it's disappointing that we've broken below the 50-day moving average But we're still above the 200-day moving average We need to get back above that 50-day moving average to stabilize a little bit And what I might do here is I might put a nice little trend line in there just to signal a Little bit of a resistance level which also happens to coincide with the 50-day moving average So that level is particularly important in the overall In the in terms of the overall direction travel the DAX is Revisiting those peaks that we saw in the middle of December If we look at this this chart here, we can see that there or beginning of January rather so basically unlike FTSE the DAX is looking as if it could well make new record highs over the course of The next few sessions the big level for me is 14,134 or only about 40 points away from that right now if we look at today's peaks It's pretty much yeah 14,114 so that's a big level this level here But what was important was this dip here did not take out the previous lows here. So again Momentum is very much skewed towards the upside the trend is you know a trend the trend is in effect until such times as There's evidence that it is turned around similar sort of story with the S&P 500. I talked about this last week again We managed to hold Above this trend line here 50-day moving average acted as a little bit of a support level But as we can see from previous instances, it generally doesn't tend to stray too far away from it and In terms of confirmation what we want to see when we break this 50-day moving average is obviously the break of the previous low Which we did not say so again It's about the momentum price action trumps everything even moving averages and oscillators that my primary indicators price price and price action previous highs and previous lows are much more important then Then breaks and moving averages and Oscillators and what have you these are secondary indicators which should be used to supplement your trading Your trading plan Marcus in Asia Sorry, it's like the Nikkei not really not the day Then the Nikkei is closed at its highest level best weekly close in over 30 years And as we can see from the big declines that we saw here ordinarily that would have been potentially bearish reversal It's been completely reversed in the space of a week And this is why bearish reversals generally need to be confirmed and in which case Even though it was a key reversal day and we came back down here. What was what was interesting With respect to this particular move lower Was that we didn't take out these previous highs through here And that was a little bit of a warning sign, you know, which is Japanese candlesticks or key reversal days Sometimes what you need to see more than anything else is not just the signal itself You need to see a confirmation of The signal and we did not see that so those twin peaks At the end of December and January around about 27,000 Acted as a fairly decent support area on the Nikkei 225 and as a result that move failed So certainly keeping an eye on the Nikkei 225 and generally reversal patterns They tend to be less reliable now these days simply on the basis of the fact that Central bank money drives markets so much now that it's very very dangerous to try and pick tops particularly in Central bank controlled indices of which the foot of which the Nikkei is very much front and centre given how much Bank of Japan owns the market, so Nikkei 225 still looking positive S&P 500 still looking positive and actually has Made new record highs this week. So very much a case of The trend is your friend So What's to be expected for the week ahead? Well, it's been a decent week for the US dollar and we've got non-farm payrolls Later today, obviously, I don't have visibility of those numbers, but all the signs point to a positive payrolls report The December report was disappointing and those of you who are listening to my webcast Will know that I wasn't unduly surprised by the fact the number was poor It was pretty much well trailed in some of the data leading up to it ISMs the employment components the weekly jobless claims the rises there and Obviously the negative print in the ADP report two days before Now we've seen similar sort of signs For this week's payrolls report positive ADP report Coming in much better than expected We've also got a new stimulus plan which was passed at the end of last year of 900 billion dollars with the prospect of another one On top of that and the January ADP reports or 174,000 jobs added More than reversing the 78,000 jobs that we lost in December And that is a very positive revision because the previous the initial December report was minus 140. So the fact to see it was revised up to minus 78 Was very much a positive sign So expectations around today's jobs report are for a for a number in the region of between 100 and 200,000 so anything less than 100,000 is likely to be a disappointment But on the other hand if it is below 100,000 then obviously the onus Will be much more on Capitol Hill politicians to pass another stimulus plan by the beginning of March Which as it goes isn't that far away given the fact that we've only got 28 days in February. Anyway, so Looking for a fairly positive ADP payrolls report. I'm sorry, non-farm payrolls report All of the economic data that we've seen thus far this week has pointed very much to fairly decent US jobs report So it'll be it'll be a disappointment if we don't get that So looking at the CMC dollar index, we've seen the dollar index make a two three months high The CMC dollar index hasn't taken out these peaks here And as a result it's starting to pull back a little bit um That's not to say that it doesn't look as if it started to form a little bit of a basing pattern We've broken this trend line here The next key level is likely to be this peak here, which is around about 963 So that 963 level could be the catalyst for further gains higher I think myself that we should see the dollar move higher and I will explain my reasons for that Um when we look at euro dollar Now last week I talked about euro dollar and I talked about the 120 70 the 120 40 area Those of you who recall that and I suggested at the time That if we broke below 120 40, then it was quite likely we've moved quite a bit lower Well, look there we go. And I also talked about the potential for an head and shoulders reversal Now it's not your textbook head and shoulders reversal simply because we've got two left shoulders ahead And a single right shoulder, but nonetheless By virtue of doing some Fibonacci price extensions I'm going to plot my breakout here from this level here through here And for me this Breakout is significant in the context of where we go next with respect to euro dollar Because I think we will probably see a move back to 117 and 60 Which would be a measured move of this Move here between the highs and the breakout Down to here. This is generally how I measure my price objectives on say for example a head and shoulders breakout a triangle breakout Or any pattern formation breakout You measure the height of the pattern Which is this here from the breakout point, which is here 120 50 Takes us down to around about 117 60 and here and now My initial target is 118 70 weaker euro stronger dollar So that's what I base my case on in terms of the stronger dollar The only reason I would reverse that view is if we go back above 120 70 and close above it and then head back towards 125 on the basis of this price action alone And the fact that we've taken out these two loads here my Basis for a trade is shifted from buy the dip to sell the rally and that is important in the context of when you like when you look to time your trades, it's about Reacting to the information on the chart and then tailoring your strategy to suit that So what we've got here is we've got a break of these two loads here That's shifted the consensus from the buy the dip trade to a sell the rally's trade And this is where we currently sit at the moment. So any moves back to here with a stop above here is now the bias towards my analysis and my trade of this particular currency there So that's euro dollar also what it means in the context of euro sterling last week I talked about euro sterling and I was fairly unequivocal. I said it's going down And It's going down So really it's a question of where are we going to next? Well, ultimately now that we've broken this very key support level here Then really we're really looking back to around about these levels here. So we're talking 86 90 86 80 for me the extent of this move It's fairly unequivocal The bank of england's shift away from negative rates is positive for the pound the vaccine trade Positive for the pound Europe's playing catch up positive for the pound There's nothing at the moment And I caveat that with at the moment That's going to sway me from my Belief that euro sterling is heading down And that's basically what I'll be looking to do look for opportunities to get a short position on And push this bad boy back down to these lows here Also, we've got the fact that a stronger dollar While it's likely to limit the upside in cable when we look at cable We can see from this chart here that sterling still remains fundamentally strong higher lows higher highs We're finding a little bit of difficulty at the 137 50 area, but as long we're hold above 136 All this series of lows through here Then the uptrend for the pound remains intact. The trend is your friend It's very very important in the overall context of what we're looking at over the course of the next few days And also we've seen a similarly positive dollar move in dollar yen Now thing with this move in dolly yen We've broken above this Down trend move here, but we're now running into the 200 day moving average That's likely to be a very significant barrier But overall The momentum in dolly yen has shifted now that we've broken through this series of peaks through here Now what we can do in terms of looking to buy the dip on dolly yen It's just draw a simple line through here And there's our next trend line So that's dollar yen Okay, so that's that's a quick precy of all the major Markets that I've got my eyes out for over the course of the next week or so Now let's look ahead to next week because actually when we look ahead at next week We've got Chinese New Year starting now ordinarily you'd be we'd be looking for Chinese retail sales China trade and what have you that doesn't appear to be in the calendar So i'm not going to preview it because if it's not in the calendar, there's no guarantee That we probably won't see it until March next year What I will be keeping a close eye on In this upcoming week is the latest fourth quarter the first iteration of uk fourth quarter gdp And that is going to be fairly instructive. I think in terms of the overall direction of the uk economy in the overall Manor as how we look at how the economy performed at the back end of Last year now. We saw a fairly decent third quarter We saw an expansion of 16 percent In q4 the economy has been much more troubled and I think therein I think lies the concern because there's been an awful lot of fog Around the uk economy in q4 because we had stop start restrictions starting in november So around about the beginning of november large parts of the economy were locked down into tier two tier three and tier four We then had The unlocking at the beginning of december Which prompted a little bit of a retail surge in the lead up to christmas And then we had the tighter restrictions in the lead up to christmas and then obviously we got the lockdown The full lockdown in january so I think the problem with q4 is that there's a good chance that We could well see a negative quarter But there's an equally good possibility that we could actually see a positive quarter because of stock piling ahead of the brexit deadline And concerns about Concerns about logistics problems at uk ports So the big question for me is Do we see a double dip? Now, you know a recession Is categorized by two quarters of negative growth So q1 of this year is going to be negative. There's no doubt about that Simply because the economy has been locked down pretty much from the 6th of january And it's likely to be locked down until pretty much The end of march There may be some loosening of restrictions between now and then the primary schools go back on the 8th of march but ultimately Q1 you can write that off bank of england have already said at this week's meeting that the uk economy is likely to contract by 4% In q1 so q4 is going to be very very important in the context of whether we double dip and That's why the manufacturing production and industrial production data will be important. That's also out on friday If recent PMIs are any guide Then we could well see a good performance from those sectors in q4 We already have the numbers have been fairly decent The big the big unknown It's obviously the services sector So in terms of the q4 We could see we could have seen a big group jump in imports as retailers and businesses stockpile goods ahead of the christmas period As well as the end of the brexit transition period. So that could give q4 numbers a boost So we've got a consensus around q4 gdp of plus to minus 0.5% It's going to be in there somewhere But I think certainly from an optics point of view a positive number will mean there's no double dip. I mean, obviously furlough Um has cushioned some of the effect in terms of the overall economy But nonetheless, I think it still will be a very positive headline media story If we actually see a positive number for q4, which again Is likely to act as a lift a sterling if we managed to avoid a negative if we have managed to avoid a q4 contraction okay, so friday data uk data fourth quarter gdp industrial production and manufacturing production for december expecting decent gains for both for industrial and manufacturing production And really it's flip a coin as to whether we get a positive or negative quarter the q4 In terms of anything else who's obviously got weekly jobless claims out of the u.s They've continued to come down From the peak that we saw in beginning of january of 965 They're now below 750 000 and the hope is they will continue to come down As optimism grows about the u.s economic recovery and u.s businesses take on more workers What we do have this week is a whole host of retail earnings and As well as AstraZeneca Now AstraZeneca obviously has been in the news An awful lot recently Not necessarily for the right reasons obviously this AstraZeneca has Got an awful lot of headlines as a result of the eu and It's threats to sanction the company over the fact that it has It's having to upgrade its plants in the european union to Upscale it's a vaccine production program So we've got the latest four-year numbers from AstraZeneca coming up Certainly we can see it's probably one of the most boring stocks imaginable in terms of price action But ultimately it is towards the lower end of its recent range And that would suggest to me that as long as the four-year revenues coming as expected at around about 26.4 billion dollars Then we're probably going to see AstraZeneca go for a nice little trip back towards The 8000 level on this particular chart and didn't want to do that. There we go back to where we were We also have numbers from twitter q4 numbers from twitter On the 9th of feb we have disney first quarter numbers from disney on the 11th of feb we've also got first half numbers from dunnell And dunnell has been one of those um success stories of the pandemic I managed to ride out the um has managed to ride out the peaks and troughs Fairly well despite the various store closures that we've seen as a result of the various lockdowns managed to recover all its share price losses from march last year Fairly quickly we can see that From this chart here has given back a little bit in the past Few weeks, but nonetheless it's finding a nice little base In and around this 1140 area. So certainly if we do get a dip in dunnell's share price um Might be worth might be worth a smaller Small little small little punt down here Um, we also have four year numbers from okado um That's likely to be um an eye opener For the one reason that it just continues to go from strength to strength it's It's actually mind-boggling when I look up and talk about okado because for me It's not so much a retailer as a technology provider The companies deal with the m&s and it's done very very well And yet it's valued nearly as big as tescos Um, tescos is the uk's number one supermarket. It's got a market capitalization of 26 billion pounds okado is valued at 20 billion pounds and yet its retail revenue doesn't even get close to a billion And tesco turns over 60 times that So the big question for me is not so much as to whether or not we can actually go any higher on okado It's whether or not it can meet the it can meet the elevated expectations that shareholders are Setting it against It's certainly it's certainly seeing some significant growth in terms of retail revenues It's just signed two deals for a combined 287 million with some robotics manufacturers So that can improve its supply chain and its picking capability But overall when I look at okado, I just I just can't get over the fact that You know, it's um Slightly frothy shall we say but nonetheless as I've said on previous Um instances the trend is your friend on this one it's still Still very much in an uptrend has been pretty much for the whole of 2020 And this year alone and if we take out these peaks here, then we could we'll see further gains through this 3000 level through yeah Um One thing that I will keep an eye out for and draw your attention to is the uber numbers as well. We've got them Um out as well as disney, so I'll cover uber and I'll cover disney for you right now Just open disney for you There we go And while I'm there, I'll open the uber chart Now I've got to say that with respect to disney or the mouse house as people like to call it On the markets have been a little bit disappointed in the um Not just a little bit surprised in the share price performance not disappointed surprised in the share price performance disney plus certainly has been ripping up trees Still got high hopes of competing with netflix and amazon prime And they are now looking to raise their prices UK subscriptions are going up to 7.99 a month in march Still cheaper than netflix um But ultimately I think there have been some missteps when it comes to Um rolling out its new content charging 30 dollars to view mule and I think was a little presumptuous Felt a bit flat Nonetheless, it's shed 32 000 jobs In its theme park resorts its holidays And and what have you But that doesn't change the fact that losses for this quarter Are expected to come in at around about a billion dollars um And that's more than what we saw in the previous quarter We're lost 710 million dollars. So certainly at the moment its key revenue earners Are hitting its bottom line quite significantly There is an awful lot of high expectations with respect to what these numbers are likely to bring about Um, and that might suggest that maybe this particular share price at the moment is a little bit frothy And may well see a little bit of selling pressure Particularly if it's disney plus numbers start to show any signs of topping out Uber again Another cash burner for you Again, I can't believe that it's valued as high as it is, but yeah, we are it is um Even without the pandemic And it's ride hailing that's been suffering as a result people aren't taking cabs. They're not traveling anywhere It's uber each business is doing very very well But the revenues that it derives from that are a fraction of its overall turnover So again It is diversing. It's the it is it is diversing Diversifying it's uh eats business Paid one billion dollars for alcohol delivery company drizzly So it can widen its delivery mix from restaurant food and pick up a bottle of wine Put it to your doorstep yada yada yada even so Losses are still expected to come in in and around a billion two billion dollars for the quarter So again, ask yourself the question whether or not it's worth a little bit of a sell-off If it can't get through this 60 dollars share mark Anyway, that's um pretty much it for This week ladies and gentlemen um Until next week in the meantime Thank you very much for listening Michael Houston talking to you from cmc market