 Hello and welcome to CMC Markets on Friday the 28th of February and this quick look at the week ahead beginning the 2nd of March and I suppose I ought to start this video with a little bit of a health warning because at the moment every time I've tried to predict a chart point this week the market has just sliced straight through it so the analysis may not last beyond the end of this video given the declines that we've seen in equity markets this week I mean I think what struck me more than anything I think is the complete flip from the optimism of early this month to the outright pessimism that we've seen in the last 6 to 7 days you really really couldn't make it up and yet it's not really a surprise when you consider the first coronavirus outbreak occurred in January and here we are end of February beginning of March and we've overseen the biggest correction or the fastest ever correction in the S&P 500 US markets in memory and the big question now is is there more to come and ultimately I think that's the question that everyone in the markets including myself is wrestling with I don't think I don't think what isn't in doubt is that reports of new cases of coronavirus are likely to continue to hog the headlines over the course of the next two or three months and the question that really everyone now needs to answer I think with respect to stock market valuations is how much of an economic slowdown are we going to see over the course of the next six to twelve months concerns about supply chain disruptions are obviously front and center concerns about consumer confidence concerns about consumer spending concerns about holdups imports are all front and center is companies pretty much line up now to revise down their forward guidance revise down their earnings expectations for 2020 for the remainder of the year obviously it's no been no surprise at the worst performing sectors that we've seen over the course of the last week or so have been airline the airline and travel sector I mean if we look at just one particular stock easy jet being a case in point the share price there over the course of the past few days has been precipitous they've down down nearly 30% and I think the big question that you need to ask at the moment is a 30% slide in the share price commensurate with the type of revenue slowdown that easy jet is likely to expect of course I think an awful lot will depend on the reaction of the authorities of governments do they impose quarantines do they impose restrictions of movement and to all intents and purposes isn't the cat already out of the bag isn't the hasn't the horse already bolted ultimately trying to restrict the spread of this infection is probably pretty much impossible now and the big question is how will events unfold over the course of the next week or so it's also next week is 11 years from the low the turnaround that we saw in the S&P 500 and the Dow the 666 level 6th of March 2009 we saw the turnaround in US equity markets and since then we've pretty much gone on a one-way visit higher of course in the last six days that's sort of unraveled a little bit and the big question really I think for me as we look towards next week going to be very indices focus and I know talked about four minutes about the macro backdrop and I think this speaks to the economic uncertainty because at the moment the economic data isn't showing any significant impact to the economic disruption that we're likely to get over the course of the next few weeks so while we've got companies like Apple, Microsoft, British Airways, EasyJet all queuing up to revise their guidance lower the big question will be going forward what companies could do well once the dust has started to settle and you could argue that companies like Domino's Pizza and Netflix could actually do quite well if everyone is quarantined at home because everyone will be binging on pizza and watching box sets but that's probably for another story but as we look ahead towards next week there are a number of items that have caught my eye and one amongst them is obviously US payrolls on Friday the 6th of March and at the moment the payrolls the unemployment data pretty much across the world has been fairly decent we've seen record low unemployment in Germany unemployment at 40 year lows 50 year lows in the UK and the US and the last payrolls report showed the US economy added 225,000 new jobs in January with wages growth of 3 percent now obviously last year we have seen a slowdown in hiring trends compared to 2018 but the average payroll number was 171,000 new jobs per month so let's look in light of the data that we've got out next week as to what the next key levels are on the S&P 500 because that weekly candle is absolutely astonishing when you actually compare it to some of the weekly declines we've seen over the last 10 years this weekly decline is probably the worst weekly decline since 2008 2009 the height of the financial crisis and at the moment markets are reacting as if this coronavirus could have a significantly similar economic impact on global economic activity so where are the next key levels on the S&P 500 well you know I mean I could have I could have given you a dozen levels last week and we would have busted through every single one of them so obviously the the levels that I'm going to identify now come with an enormous health warning so let's look at the August lows of last year given the fact that we have fallen quite sharply we're still only back at levels that we saw in the summer of last year so you need to put the declines into context but nonetheless the next key level on the S&P 500 is 2800 and that's this series of lows through our August of last year so I will be keeping an eye on those this series of lows through here assuming that the sell-off that we've seen this week continues into next week as investors try and make up you know make an assessment on where we're likely to go over the course of the next few days and weeks so that's the S&P let's look at the DAX DAX equally important as we look forward to the price action over the course of the next few days now we have broken a very key trend line from the lows that we saw at the end of 2018 we've also broken below the 200 day moving average so we've broken a number of very very key levels obviously the breakthrough through 12900 was a key trigger in the sell-off that we've seen over the course of the past few days and the likelihood is that we could well retest this series of lows that's going to be key I think over the course of the next few days and again that's going to be the lows of August last year around about 11,200 so assuming we can't get back above the 12,000 level over the course of the next few days then we need to be looking at the next area of support which comes in around about 11,200 if we make that a weekly chart we might have a quick snapshot at the 200 week moving average and at the moment we are slightly below that but for me I think really the big test now given the technical breaks that we've seen this week is whether or not we retest these lows that we saw in the summer of last year around about 11,200 so that's the DAX we're looking at the FTSE 100 in a minute what we've also got coming out next week is the latest PMI numbers manufacturing PMI numbers across the globe from China in particular we'll be paying particularly close attention to in light of the economic shutdown that we've seen there at the moment there's been little evidence that the coronavirus has had an effect on economic activity in Europe but it's still early days there's still likely to be significant diverse disruptions to supply chains so the improvement that we've seen in the PMIs particularly German PMIs is unlikely to continue and as such the headline number is probably not as important as the internals of the February numbers that we're likely to get virus outbreaks that we're seeing in Europe are expected to have a significant economic impact in the weeks and months ahead backlogs in supply chains are likely to be closely monitored for evidence of slow downs in demand as well as possible inflation represses disruptions in supply chains could actually introduce an inflation shock which central banks are unlikely to be able to mitigate because all of the talk at the moment is talk of rate cuts and ultimately you can have as many rate cuts as you like a 10 basis point in the ECB rate is unlikely to make much difference if you have a demand shock same applies to the US Federal Reserve looking at the US economy no evidence at the moment of a significant slow down there and yet markets are pricing in the prospect of two to three rate cuts by the end of this year ultimately it's not really you know it's difficult to sort of estimate the effects that could have or would have on any demand disruption so other central banks to keep an eye out for next week we've got the Bank of Canada rate decision on the fourth and we've got the RBA rate decision on the third of March now the Australian economy has taken an absolute caning over the past few months we've had the Australian bushfires we've obviously seen the China slow down and we've also obviously got concerns about coronavirus and the Australian dollar earlier this week had its lowest levels since 2009 so big big breakout on the Aussie dollar can we go any lower well obviously I think an awful lot of that will depend on US Fed rate cut expectations but ultimately if we look at the Aussie dollar it's not really a pretty picture if you look at the long-term chart we technically we could well go an awful lot lower and revisit levels last seen at the height of financial crisis in 2009 2010 not there yet but certainly I think any rallies back to around about 6690 could well find some selling interest as we head back towards 64 and potentially 63 if economic activity in China doesn't show any significant sign of picking up and the RBA starts to become ever more dovish let's not forget the RBA has more room to cut rates than a lot of other central banks so with with with with headline rates above zero and they do have further scope to cut rates even further so keep an eye on the RBA expectations awful rates to remain unchanged at 0.75% but really I think I wouldn't rule out surprise rate cuts from both the Bank of Canada and the RBA next week if this weakness in equity markets continues going forward on as far as moving back to the FTSE 100 let's have a quick look at that we've broken a very key trend line from the lows all the way back in 2009 over the course of the past few days we're currently testing a very very key support level between 6500 and 6420 now why am I looking at that particular level it because it also coincides with these series of highs back here in 2016 so there could be a little bit of support coming in between this high April 2016 around about 6430 in this series of highs through here in October 2015 the autumn of 2015 6480 6490 again a very very big decline in the FTSE 100 800 points over the course of the past week or so you know is that sustainable or could we get a very sharp short squeeze over the course of the next few days again I think it's very much a case of licking your finger and sticking your finger in the air and testing which way the wind is blowing at the moment sentiment is really really fickle at the moment in terms of earnings announcements next week we've got domino's pizza actually for your earnings on the 5th of February and it's been a decent 12 months of domino's pizza share price gains of over 30 percent over the last year though a lot of those could have actually been knocked off over the course of the past few days let's have a quick look at the share price for that and we can see that domino's pizza hasn't been immune to the declines of the past few days significant decline since friday 21st of February it's pretty much a case of sell everything on that basis but you have to think that of all the stocks out there they could probably be well best positioned for a significant rebound once the dust has settled we've also got latest numbers from itv declines and traditional advertising been a constant problem companies been doing better than expected largely been down to itv studios obviously there'll be the effects of the rugby world cup which should have given it a fairly decent revenue boost while the return of i'm a celebrity and dancing on ice could well help as well but again they're down quite significantly quite significantly today over three percent and could well retest the lows that we saw in the summer of last year and last but not least we've also got greg's a success of the vegan sausage rolls the big bonuses that were announced at the beginning of this year for all of their staff sharing the love to a certain extent but again greg's share price being caught up in the selling frenzy and and again i think the numbers are less important than overall sentiment at the moment but there's certainly going to be decent support in and around this 20 pound level in and around these lows and just below that again the lows back in october last year also worth keeping an eye out for next week we've got services pmi's as well we saw a big slowdown in french consumers spending in january so the big question for me here is will that get reflected in the services pmi number for the french economy when they get released on the fourth of march i'm going to finish up with gold because actually gold prices have actually struggled to make gains after the multi-year peaks that we saw at the beginning of this week and that's got an awful lot of people scratching their heads well actually it's not that surprising because i think you know while gold prices are treated as a little bit of a safe haven when you get the amount the extent of the sell-off that you've seen over the course of the past few days you will get an awful lot of gold liquidations on the back of margin calls for stocks that's likely to weigh on the gold price as investors liquidate gold holdings to meet margin calls on the big declines that we've seen over the course of the past week or so so while you could see a little bit of a sell-off in the short term gold prices are likely to remain fairly well underpinned particularly if we do get a significant number of rate cuts from the federal reserve and we do get concerns about inflation start to take off as supply chains seize up on the back of a of available product so we're keeping it on the gold price and only pull backs to around about 15 85 15 90 over the course of the next few days okay i've gone on slightly longer than i anticipated today but there's an awful lot to get through don't forget we do have a webinar on non-farm payrolls on friday the 6th of march so that should be interesting particularly if we've still got the volatility we've had over the past few days but in the meantime hopefully stay out of trouble on the trading front have a great weekend and i will see you all next week