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Negative Headlines Grab Markets’ Attention as Equity Rally Stalls

 

There are convincing signs that the rally on equity markets has stalled in the second half of this week. European indices gained less than 1% on Friday attempting to price in some early positive developments in coronavirus trends. There is not much to rally on in the short term, while increasing number of negative headlines feeds cautious state of the markets. The NYC authorities are mulling over extension of restrictions after closing schools as the mayor of the city de Blasio said that restaurants could be closed within the next week or two. Another heavy blow of economic activity in the US which the markets have not yet fully absorbed.

US Treasury Chief Mnuchin said that the $ 4.5 trillion emergency lending programs, which expire at the end of this year, won’t be extended. The Fed loses significant potential to absorb toxic debt in the event of a new shock, while medium-sized businesses lose access to direct loans from the Central Bank (through the Main Street lending program). However, it is possible that the proceeds will be used by Congress to fund other programs.

Initial jobless claims in the US fell short of forecasts for the first time in four weeks. Really bad signal. The increase in the unemployed amounted to 742K against the forecast of 707K, which likely reflects the impact of coronavirus restrictions, which are increasing in the US:

1-1605875634.png

The negative print in the data point can be an early flare of slack in labor market recovery which warrants more attention to the data update in the next week. To continue the upward trend, equity markets would need a breakthrough in the fiscal deal negotiations which seemed like the only thing that can offer broad-based help to bullish sentiment.

However, it makes sense to expect a breakthrough not earlier than in January 2021 as runoff elections to the Senate in Georgia will take place then and determine who will get majority in the Senate. Based on the following chart, the Republicans should have a negotiating advantage with Democrats:

2-1605875640.png

Source:Smarkets.com

The growth of existing home sales in the United States left many forecasters bewildered. In October, sales increased by 4.3% versus September (-1.2% forecast), while the monthly growth in September was revised to 9.9%. Thus, in annual terms, sales increased by as much as 26.61%. Interestingly, the median price of home sold also increased - by 15.5%. Demand grew despite pandemic restrictions, falling incomes, high unemployment, to the extent that 2020 turned out to be the best year for the secondary market since 2009:

3-1605875645.png

Source: NAHB

Obviously, the sales dynamics should offer some prolonged demand for goods and services of companies in home-improvement market.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Expectations of a new Business Cycle Warrant Pressure on USD

US index futures started the week in high spirits, trading in modest positive territory thanks generally supportive fundamental background. Oil prices continue to move higher ahead of the OPEC meeting on November 30 and are likely to hold onto gains after the second test of $43 resistance level. As expectations brew in the markets that global economy enters recovery phase of a new business cycle, the commodity market, in particular energy prices, should be the leading indicator of these expectations. Commodity markets, especially oil tend to outperform in this phase of the cycle.

Recovery of drilling activity in the US, major OPEC’s rival unexpectedly slowed despite rise in the rise prices, which further supported the market on Monday. Baker Hughes reported on Friday that rig count declined from 236 to 231 units.

Consumer confidence in the Eurozone declined took predictable downward path, the corresponding index fell to -17.6 points in November against the forecast of -17.7 points. This is a first indication that the shock to the EU economy from the reimposed lockdowns may be in line with general level of concerns.

Since the start of November, the best performance among major currencies has been shown by currencies tied to business cycle while the currencies where defensive assets prevail underperformed. The greenback turned out to be the main outsider:

1-1606124709.png

The index of US currency (DXY) is expected to play with 92.00 support this week without conclusive movement below the level, thanks to steadily rising optimism in the leading commodity markets, keeping expectations of a new investment cycle high.

Price action in the equity markets is expected to remain muted in the first half of this week, as the US celebrates Thanksgiving on Thursday and the start of shopping season on Friday. Economic calendar this week is relatively uneventful with durable goods orders, US Q3 GDP, Core PCE inflation set to hit the wires Wednesday. Perhaps the most important report this week will be the Fed's November meeting minutes, which will be scrutinized for clues about possible increase in QE purchases in the next month.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Opposition in OPEC+, Fed’s Powell speech: key events to watch this week

 

 

EURUSD resumed its movement towards 1.20 on Monday in line with our expectations outlined last week, however buyers are in no hurry to break through the level. Greenback index remains in a mild downtrend and there are no prerequisites for a significant pullback in December. A breakdown of the 1.20 level in EURUSD in the first half of this week will depend on whether OPEC + decides to extend current output cuts. Then the pair will likely pay attention to the macro updates from the US (ADP, NFP, PMI indices) and remarks of the head of the Fed Powell and Treasury Secretary Mnuchin, which are going to speak in the Senate this week.

 

The minutes of the Fed's November meeting showed that the question of additional monetary easing in December remains open. Powell's rhetoric this week is expected to shed light on the Central Bank's December action. Risks are biased towards the announcement of additional easing (most likely increase in Treasury purchases), which is a factor of pressure on the USD.

 

The minutes of the ECB meeting and the comments of the chief economist of the Central Bank Lane last week indicated that the Central Bank is reluctant to cut deposit rate or increase QE (due to low efficiency and high costs) and is likely to resort to soft and targeted measures. Expectations of strong monetary easing, which were priced in the euro, are being gradually priced out, removing one of the burdens from EUR.

 

Oil opened lower as an “insider fact” leaked to the market ahead of the upcoming meeting that some participants rebelled over the extension of the current production restrictions. The opposition was Kazakhstan and the UAE - the participants, which, fortunately, make up an insignificant share of production in OPEC +. Chances are high that key players, such as Russia and Saudi Arabia, will be able to convince those who disagree to change their stance, or agree to take on part of the obligations (as was the case with Mexico at the last meeting). Moreover, the story with the opposition is a good reason to correct downward. As a result, oil may still jump up on removal of purely “formal” uncertainty, but medium-term prospects are not clear. 

 

China's manufacturing PMI rose, indicating that economic activity in the sector was picking up in the controversial month of November, which at least maintains state of relax in key equity markets. The index rose from 51.4 to 52.1 points, beating expectations.

 

This week, the focus may be on measures to contain Covid-19 in the United States. The United States let Thanksgiving Day pass without tight restrictions, which could trigger a new leg of rise in daily cases after levelling off at the end of the month:

 

 

 US-ENG.png

 

 

The dollar index is expected to test 91.50 in the first half of the week, with the highest pressure exerted by the European currency.

 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

 

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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OPEC decision is likely to have short-term impact as focus turns to demand side

 

Positive update on oil inventories in the US pulled WTI above the key level of $ 45, however, prices have been moving in a narrow box as OPEC is dragging its feet on key output decision:

 

Screenshot-2020-12-03-at-14-09-59.png

 

EIA data unexpectedly indicated US crude oil inventories declined by 679 thousand barrels. Stocks at Cushing decreased by 317 thousand. Drawdown in inventories was an unexpected outcome which produced some upside in the market as it came against the backdrop of an increase in oil imports and a decrease in refinery utilization rate, indicating that increased oil exports in the reporting week made up for this decline.

The data showed that oil exports from the US surged by 625 thousand bpd to 3.5 million bpd, which indirectly indicates a rapid recovery in demand from foreign refineries.OPEC is making an important decision today about output cuts. Initially, the decision was supposed to be made on December 1, but disagreements arose among the participants and it was decided to postpone the meeting. The market is leaning in favor of a positive outcome of the meeting, but in my opinion, OPEC will opt for balanced solution because recent economic data around the world indicates brisk recovery and oil producing nations may be reluctant to miss this demand opportunity.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Oil market appears to be slow to digest OPEC+ new trade-off

 

The new OPEC+ deal appears to be a massive success both for oil producing nations and the market. Agreeing to boost production in January the group could convince market participants that surplus inventories will nevertheless decline. The deal was somewhere in the middle between the worst and the best possible outcome of the meeting. Oil-producing nations will start to increase output from January 2021, but great flexibility of the new plan was a key to soothe market concerns. 

This week was difficult for OPEC as due to disagreements the meeting scheduled for Tuesday had to be postponed to Thursday. The deal participants came to a new agreement, but initial market reaction to it was tepid. OPEC+ plans to increase production from the current level by 500K bpd starting from January 2021, which is less than in the worst-case scenario (1.9 million bpd). In doing so, the organization will monthly assess market conditions in order to better adjust the supply. The deal also included the condition that the members cannot increase output by more than 500K bpd per month.

The best outcome for prices would be to extend current output cuts for another three additional months, however, judging by the market reaction, the market liked the OPEC+ flexible output plan. 

At first, the market reacted with a small upward leap, but on Friday spot prices increased by another 1%. A barrel of WTI was trading above $ 46 a barrel, the highest level since early March while Brent was trading above $49 a barrel. An important point was the very fact of the deal - recall that in March prices collapsed due to the fact that among the main producers a short-term situation arose where "everyone produces as much as they want."

The parameters of the deal were determined in such a way that implementing it OPEC+ should keep the market in a deficit, thus drawing down inventories and pushing prices up. As a new coronavirus shock becomes less likely to happen, there are no major obstacles for a recovery in demand, so prices have a room to rise. In December, Brent will probably be able to touch $51 per barrel, but it is preferable to wait for a pullback, if we want to bet on this outcome:

 

Screenshot-2020-12-04-at-17-37-52.png

 

However, next year, after Biden moves to the White House, Iran's return to the market could become a serious threat to the market. In other words, the risk of successful negotiations between the United States and Iran on the nuclear program. If sanctions on Iran are lifted, the market will face a challenge in the form of a potential 1-2 million barrels of additional supply from Iran. However, this risk is not traced on the horizon of 3-4 months.

 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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A case for a bearish pullback in S&P 500. What could go wrong?

US job growth fell short of expectations in November, pointing to waning recovery momentum in the US economy. However, it didn’t stop the US equities from renewing all-time highs. SPX inched closer to 3700 points, DOW rose above 30,000 mark.

On Monday, equity markets went into a mild retreat while US currency recovered some of the lost ground. The biggest question is the strength of this downside move. In my view, fundamental background and news flow expected this week suggest that the 3700 mark should remain a local resistance for SPX for a week or so and a retracement to 3650 (100-hour SMA support) is likely. The next target that we could then consider is a test of an intermediate trend line at 3620 points:

Screenshot-2020-12-07-at-15-57-43.png

 

Let’s look at the arguments. 

The NFP report was actually worse than the headline numbers suggested. Job growth calculated on the basis of firms' payrolls (so-called establishment survey) slowed to 245K (460K exp.). The same indicator, calculated through the household survey (more precise measure), was -78K. There is a backstory that indicated that we had to expect this kind of a surprise - November dynamics of initial claims for unemployment benefits (which I wrote about here). Unemployment rate decreased by 0.1% but it remains a highly biased indicator - if we look at employment rate (share of employed from working-age population), it is still significantly lower than it was in February:

Screenshot-2020-12-07-at-15-12-05.png

 

Over the weekend, the data showed that the US hit a fresh record for daily cases of Covid-19, hospitalizations, and ICU occupancy rate:

Covid-19.png

 

In other words, the pressure for local government to tighten restrictions at least for some time, increased, which present a near-term risk for the markets. 

Certainty about the vaccine, unfortunately, does nothing to ease the short-term pressure from rising Covid-19 positivity rate. The latter has intensified thanks to lax rules during Thanksgiving and the start of shopping season which led to more crowded shopping places.   Therefore, there is a risk that social restrictions in the US could be briefly tightened again, and with the economy losing momentum in November, December could be very weak in terms of employment and economic recovery.  It is no coincidence that Congress stirred in December and is going to adopt a $ 900 billion stimulus package within a week or two. 

Basically, swift approval of the stimulus bill is a key obstacle for prolonged decline as positive headlines can quickly spur another leg of buying momentum making bearish pullback quickly losing integrity.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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This broken link between banks and bond markets indicates Central Bank support is the only thing that matters for stocks

Price action in European equities and US futures lack clear direction on Tuesday as markets wait for a "Christmas gift" in the form of a fiscal deal. In the absence of news headlines signaling about progress in stimulus talks, there is a chance for equity markets to stage a minor pullback (scenario that we discussed yesterday) and the signs of bearish pressure do persist. The greenback remained weak against other majors, trading below the key foothold at 91 points. 

While stocks markets trade near all-time highs, sustained by expectations and liquidity backstop from the Central Banks, signaling that the worst is over, the Bank of International Settlements issued a warning, saying that the crisis is moving from liquidity to default phase. 

 

In this regard, it is significant how the two major groups of lenders - banks and market investors (indirect and direct channel of financing) changed their lending attitude. If the former has been tightening their credit standards, the latter, on the contrary, has been lowering the credit risk bar:

Screenshot-2020-12-08-at-15-40-31.png

 

Bank and bond market assessment of credit risk usually move in sync, but now we a strong divergence which suggests there is a strong factor breaking the interplay. This factor is obviously “unlimited” credit facilities offered by Central Banks and it means that complacency in bond markets may hinge heavily on the Central Bank backstop.

Anyway, current focus remains on the stimulus talks in the US. In addition to disagreements between parties, there is another obstacle on the way to a fiscal deal - a Christmas shutdown. The work of Congress is funded until December 11, so in order not to interrupt negotiations, legislators will first have to approve a bill that will finance another week of work and bring fiscal negotiations to their logical conclusion. Therefore, the focus of the markets is primarily on whether Congress will succeed in approving funding bill. The voting on the bill is due on Wednesday.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

In its quarterly report released on Monday, the "bank of all central banks" said that while the recent rally in global equity markets was justified by compression of interest rates in bond markets and rotation of investors into risky assets, quick development of vaccine and thus foreseeable end of the pandemic, current market valuations may not fully reflect the risks of defaults. This is better reflected in dynamics of credit spreads in the US and Europe which rapid decline remains out of step with stalling recovery of firm revenues, key measure of quality of a firm as a borrower. It means that bond market valuations may underestimate risks of corporate defaults as well. 

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US stocks dodge correction as new US stimulus plan seems to suit both parties

US stock market once again dodged looming bearish pullback on Tuesday thanks to positive news on the stimulus package.

Treasury Secretary Mnuchin presented a new stimulus plan on Tuesday that takes into account the priorities of both Democrats (funds for federal and local authorities) and Republicans (liability protection for businesses). The news immediately had an effect on the markets - the S&P interrupted the onset of a slump and swiftly climbed above the 3700 mark:

Eng-Stimuluis.png

 

 

European stocks and oil prices rose on positive news from the US on Wednesday emerging market and commodity currencies strengthened against the USD. The move is very common to risk-on environment, which so far is based only on positive expectations from fiscal aid and start of a new economic cycle in 2021. 

We hold our bearish view on USD and bullish on US stocks in December because US fiscal stimulus remains key theme that drives equity valuations and the potential from it is still untapped due to lack of conclusive information. 

On the bearish side, the US credit agency Fitch said on Tuesday that it’s not planning to upgrade credit rating of any advanced economy for 2021, despite positive vaccine developments and favorable economic outlook. Fitch's chief economist told Reuters that the first positive changes in economic growth are shifting to 2022 due to downbeat impact of the second wave of social curbs in developed economies. Also, mass vaccinations in emerging market economies will begin later than previously thought due to logistics problems, as well as modest volume of pre-orders of the vaccine.

ZEW Expectations Index, the leading indicator of economic activity in Germany, significantly exceeded expectations in December. Key leading gauge of business conditions printed significantly higher, rising by 16 points to 55 points:

Screenshot-2020-12-09-at-14-28-17.png

 

 In the Eurozone, the index of economic expectations made a huge jump by 21.6 points to 54.4.

The uptick suggests that economic expectations in Germany almost fully recovered after a sharp decline in the previous month (against the background of lockdowns). It’s a very good sign for Eurozone that economic expectations responded to vaccine news as this suggests that everything is fine with forward-looking indicators, which include investment spending. If propensity of spending remains high, the only thing that Eurozone government needs to do to protect future recovery is to offset short-term transient impact from lockdowns on consumption.  

Robust expectations tell us that the investment component of Eurozone GDP will likely show quick recovery in the first quarter of 2021, as investment spending depends on perception of future economic conditions like level of uncertainty and consumer demand and is highly correlated with economic expectations.

The index of current conditions remained in a deeply negative zone (-66 points) but markets mostly likely ignored it as near-term lockdown impact has been priced already before lockdowns were introduced.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Is there anything to stop stocks decline except fresh fiscal headlines?

The ECB meeting had little chance to send Euro lower: recall that on November meeting, Lagarde warned investors that they should expect a major policy adjustment in December, but since then various ECB officials have been steering market expectations towards much less easing. Which, in fact, happened on Thursday - the bank just raised the limit of the pandemic asset purchase program by 500 billion euros (which in no way obliges the bank to ramp up asset purchases) and increased long-term cheap financing to banks (the so-called TLTRO program). The ECB did not increase the monthly QE purchases which of course was a major disappointment. We discussed such an outcome in our previous analyses and likely impact on the euro (mainly bullish).

The second important point, which at the same time surprised and upset, is that EURUSD is already above 1.20, and the ECB did not even blink an eye. There was something like usual phrase "closely monitoring Euro exchange rate", which is of course not enough to contain Euro rise. Furthermore, the statement like equals acknowledging that exchange rate is fair and there is nothing super-speculative in it that needs to be suppressed. 

EURUSD uptick in response to the ECB meeting is completely justified and indicated that the ECB was definitely underdelivered to easing expectations. Of course, it is bullish sign for the common currency: 

Screenshot-2020-12-11-at-15-57-21.png

 

 

Friday pullback is, in my opinion, a decent opportunity to consider medium-term long positions on the pair. Corrective pressure was caused by a decline in US futures and weakness in European markets (not the euro). As soon as this correction runs out of steam, we will probably see 1.22+ on the pair.

Considering other European currencies, such as SEK, NOK, which are also sensitive to the ECB's policies, the outcome of yesterday's meeting will probably also add weight to them and purchases against major outsiders in major currencies such as USD are most justified.

Regarding the stimulus in the US, there was yet another disappointment - the final decision on fiscal aid may not be made until Christmas. Speaker of the House of Representatives Pelosi hinted at this. The main catalyst of growth has been taken away from the stock markets and it’s clear that there is little to stop the decline except fresh clues about the fiscal deal.  

  Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Explaining 10yr-2yr spread and Fed’s meeting baseline scenario. Near term USD outlook

Decline of US Dollar accelerated on Wednesday before the Fed meeting as the consensus strengthened that the US Central Bank will float additional monetary easing measures today. On Monday we discussed the possible forms of this easing - an increase in the duration of the Treasury portfolio, or an outright increase in QE (which is less likely). QE is when the central bank tries to adjust basic risk-free market rates - government bond yields, through guaranteed monthly asset purchases of some volume. By adjusting risk-free rates, the Fed expects other interest rates (including lending rates) to adjust as well. An increase in portfolio duration is when the central bank decides to buy more long-term bonds than short-term bonds in order to lower the long-term borrowing costs. 

And here is the key argument why the Federal Reserve may need to increase duration of its bond purchases:

Screenshot-2020-12-16-at-15-20-30.png

 

This "somewhat forgotten" chart of the spread between 10-year and 2-year Treasury yields is a well-known "harbinger" of recessions and booms. Recall that from the summer of 2019 this chart was a popular “workhorse” for gloomy forecasts of some market doomsayers. When the spread is at its minimum, the market, roughly speaking, expects stagnation or recession, and vice versa, when the spread grows, it expects a rise. Surprisingly, the market was not wrong about the latest recession, despite its completely non-obvious and sudden origin.

The chart now shows that the demand of long government bonds relatively bonds with shorter maturity is rapidly declining. In other words, the near-term outlook for a return on capital looks more promising than the long-term one. At least that's what the market thinks. Because of this, long-term rates rise as the market demands ever higher returns in order to invest in a “less promising”, long period of time. The Fed may intervene today if it considers that such an increase in long-term rates is not good for long-term borrowers and will slow down the economic recovery. An increase in QE for this purpose looks like overkill, therefore, changes in the composition of purchases within the current volume are more likely - which is what the US stock market and US Dollar are trying to price in.

Short-term USD technical setup:

ENGUSD.png

 

As for the dollar index, several attempts to break the key 90.50 support ended with a breakout of the range (90.50-91.10), which, in my opinion, is a clear signal of resumption of downside pressure. At the same time, the downward movement today brought the price beyond the short-term descending channel, which sets the stage for a test of the channel's lower border on a higher timeframe (89.75) and only then a somewhat significant correction (to 90.50). 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Key near-term risks for risk-on. USD targets for the next week

Risky assets saw modest losses on Friday amid the emergence of a new roadblock in the stimulus package negotiations - Republicans' proposals to restrict the Fed and the Treasury to use credit facilities created in response to the pandemic. In particular, this concerns the Main Street program (direct lending by the Federal Reserve to small and medium-sized enterprises), which expires at the end of this year.

Democrats see this as an attempt to tie the hands of the Biden administration (in terms of ability to respond to possible economic shocks) and, of course, will not easily back down on this issue.

Senate Republican leader McConnell said the talks could drag on over the weekend. It seems that politicians are trying to hold out until January's Senate run-off elections in Georgia where representatives from the two parties will compete for key seats that will determine whether the Republicans will receive a majority in the Senate.

While the pandemic has lost some of its news coverage, data shows it continues to wreak havoc on key economies:

US-pandemic.png

 

Germany-eng.png

 

At the end of November, the curve seemed to be drawing a peak, however, as we are now seeing, it was only a pause before new highs. And if the United States is trying to cope without lockdowns, then Europe is more conservative in this regard. The data shows that the path is open for greater social constraints.

From the fundamental statistics, it is worth paying attention to the update on applications for unemployment benefits, which indicated that worrying trends in labor market gain momentum. Regarding to initial claims, consensus was + 800K but the indicator printed + 880K. Initial claims have sped up sharply in the past two weeks:

Weekly-Claims.png

 

 

As the US labor market began to show weakness in November, jobless claims have become more significant in understanding how quickly the recovery wanes and how much the economy needs new stimulus. Judging by the data, December promises to be very weak in terms of US employment growth and the NFP in January is likely to show a negative surprise.

In my opinion, unless we get a breakthrough in fiscal negotiations over the weekend, next week will be a correction week for the dollar index in line with the technical idea I described on Wednesday. The target of bullish retracement is 90.50 mark. 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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  • 3 weeks later...

Two reasons to sell USD in January

The beginning of the new year was not distinguished by any surprising moves in FX space. USD remains under heavy pressure, ceding ground to majors, comdollars and EM currencies. It was though unusual to see that USDJPY and USDCHF (i.e. safe-haven vs. safe-haven pairs) also saw sharp downside moves. 

There are two ideas of why the USD can test new lows in the first half of January.

The first idea (the macro one) which drives USD fall is that no global central bank can beat the Fed in easing monetary policy. Recall that following the Fed meeting in December, all voting members of the Fed, with the exception of one, expect that the first rate hike will take place no earlier than 2023. No other central bank has dared to provide such strong forward guidance about interest rate path. And they won’t dare, because if we assume that the worst is over in the latest economic downturn, then it is reasonable to expect that central banks (except for the Fed) will gradually move towards normalization of interest rates, which will only widen the gap in policy easing between the Fed and other central banks. This is a strong factor of weakening of US currency. 

Only a rapid acceleration of inflation in the United States (first of all, its “precursor” - inflationary expectations) can prevent the realization of such a scenario, which will require an urgent increase of the interest rate. However, given the Fed's new inflationary concept, it won’t be easy for inflation to scary the Fed. It would need, for instance, to accelerate to 2.5% -3.0%, and do it in a short time. Over a timespan of next quarter - six months, such an outcome can be safely considered a tail risk.

Technically, the US currency was held in a downward sloping channel despite some attempts to break higher over the Christmas holidays. Earlier, we discussed that short positions should be a priority, and given that upward correction from 89.50 has been completed, the next targets are 89.00 and 88.75 horizontal levels, and then, after a rebound, the lower border of the bearish channel in the range of 88.75-88.50. The big question is about the timing of realization of this scenario.

Screenshot-2021-01-04-at-14-51-51.png

 

The second idea for shorting USD, especially over the next week or two, is sharply increased chances that Democrats will be able to strip Republicans of the Senate majority:

Screenshot-2021-01-04-at-15-13-24.png

 

Recall that the second round of elections in Georgia will take place in mid-January, where Democrats and Republicans will compete for two seats that will play pivotal role in determining which party will control the Senate. 

If Republicans lose their majority, their opponents effectively gain control of the Senate despite the tie in seats distribution. Economic initiatives of Democrats, as we saw from the battle over the fiscal deal in October-December, are often associated with a more aggressive accumulation of national debt (and most likely the money supply, since the Fed will be forced to join), which is likely to result in faster USD devaluation. In my opinion, “sell USD on the rumors” idea will likely grab markets’ attention this week.  

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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There is too much tax uncertainty for US big tech right now. Time for shorts?

In my Monday post we discussed why it may be appropriate to short US Dollar in the first half of January. Yesterday we’ve got the first signal of development of this our scenario. USD index (DXY) fell from 90 points to 89.20 on Wednesday, while EURUSD rose above 1.23, GBPUSD tested a new multi-year high at 1.37 while Gold sticks to its plan to climb above $ 2000, and I think it will succeed. Recall that the key chart I recommended to keep an eye on is the odds of Democratic win in Georgia run-off elections: 

Screenshot-2021-01-06-at-14-39-41.png

 

Betting odds of Senate elections outcome in Georgia

The likelihood that both Democratic candidates will win the hearts of voters in Georgia rose to 98.04%, up from about 50% on Monday. At the same time, as we can see, the dollar index really sank noticeably. The point is that if the Senate comes under the control of Democrats, the markets will get two medium-term themes for trading:

- The prospect of Democrats pushing through a new large stimulus package;

-The prospect of Democrats raising taxes for corporations and the rich.

The first point implies that the US government will be forced to ramp up borrowing (to fund a new stimulus bill). If holders of US government bonds really expect new bonds to flood the market, they should be inclined to sell them now expecting price declines. As bond yield and prices are inversely related, we should see increase in bond yields as a market reaction. And we do observe it: 

Screenshot-2021-01-06-at-14-58-02.png

 

Additional stimulus package combined with the Fed's ultra-dovish forward guidance (keep interest rates at zero until 2023) is an almost guaranteed increase in inflation expectations (and then inflation). Then gold, which hedges inflation risk, should also increase in price what we currently observe as well:

Screenshot-2021-01-06-at-15-08-35.png

 

On Wednesday, Nasdaq futures breached to the downside (-1.78% at the time of writing of this post):

Screenshot-2021-01-06-at-15-59-59.png

 

If you remember what Biden's tax proposals included, then it becomes clear that if Democrats gain control over Senate, their plans for income redistribution will hit corporate America. According to BofA calculations, S&P 500 companies will see their profits decline 9.2%, with tech sector suffering the most if Democrats pursue their tax reforms. For big tech companies, potential drop in percentage profit is double digit. Hence the early negative reaction in the futures market, which I believe is far from over. In my view, rising uncertainty about corporate tax policy in the US, stemming from the rising odds of Senate Control by democrats, lends powerful bearish impetus to shares of Apple, Microsoft, Facebook, Amazon, Alphabet, at least in the near term.

  Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Inflation expectations rise in the US. What does it mean for a new fiscal stimulus?

Judging by the recent developments in the US money and Treasury markets investors start to expect that the Federal Reserve will start to normalize policy sooner than expected earlier. If a month ago a first interest rate hike was expected no earlier than the second half of 2023, this month expectations have sharply shifting closer to present time, pricing in a rate hike at the start of 2023. While consumer inflation in the US is dormant, inflation premium in bond yields is rising very quickly, making it more expensive for the US government to use debt markets to finance new stimulus programs. For example, the interest rate on 10-year Treasuries has risen from 0.92% to 1.15% in just a week since the beginning of the new year:

Screenshot-2021-01-12-at-14-22-29.png

 

Investors are demanding higher compensation in bond yields primarily due to rising inflation expectations. If future inflation is expected to rise, then purchasing power of future stream of payments is expected to decline more. Expected average inflation for the next 5 years as measured via 5y5y inflation swap climbed above 2.0%, but Core PCE (the Fed's preferred inflation metric) is still at 1.4%. The market is running ahead as usual, therefore, if the inflation data for December-January show an acceleration, the market will be hardly surprised as the rise should be priced in:

Screenshot-2021-01-12-at-17-11-53.png

 

 Although due to discrepancy in expectations and actual inflation, bond markets may express more sensitivity to negative surprises in inflation in the coming months, since in this case the market's error in assessing inflation will be revealed. If consumer inflation slows, Treasury yields may also quickly adjust downward, while extend its trend upwards. 

Inflationary expectations are likely to maintain an upward trend, so discussions in the US Congress of new support measures will certainly imply the participation of the Fed in the form of an increase in QE. Otherwise, borrowing another $ 1 trillion (the estimated amount of fiscal impulse that the Democrats will approve) will be problematic, as future debt service costs will increase significantly. The dovish rhetoric of the Fed is known to be a negative signal for the dollar.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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USDJPY and Biden fiscal plans

There was only a brief pause of stocks in terms of bullish headlines from the US government: starting from the last week, we observe development of the store with a new aid package from the Democrats who have finally grasped full power. The size of the expected support is being revised very quickly: last week Goldman estimated the amount of stimulus at $750 billion (of which $ 300 billion will be distributed in the form of stimulus payments), then there were estimates at $1 trillion, $1.3 trillion, and before Biden's today's address to the Americans, the markets are already talking about $2 trillion. Of course, this story roots out any possibility for USD to strengthen and puts pressure on Treasury prices as the market expects a huge portion of the fresh bond supply.

Inflation in the US accelerated in December from 1.3% to 1.4% on an annualized basis, however, as we discussed earlier, the market is not surprised by this acceleration. The acceleration of inflation in the coming months is already reflected in the market inflation premium in bond yields. Comparing the yields of inflation-protected and inflation-unprotected 10-year Treasuries, it is clear that the market expects nothing in terms of interest rates, but expects in terms of inflation:

https://i.ibb.co/ThkM02D/Screenshot-2021-01-14-at-16-54-22.png

 

TIPS yield has changed marginally since October 2020 however 10-year bond yield has more than doubled, from 0.5% to 1.15%.

Weak inflation dynamics would have added weight to the dollar, however, the report played against it.

It was interesting to see the data on the Japanese economy for November and December. As it turned out, the economy was better at weathering through the pandemic crisis in the fourth quarter than previously thought. In general, Japanese assets and the yen look undervalued now, because in general, Japan has grown poorly in the past decade, forcing the Bank of Japan to manipulate rates (not very successfully by the way). Due to the long history of stagnation, investors could be biased about Japanese assets. In terms of data, the key for Japan industrial sector showed good activity in December - industrial orders grew by 1.5% against the forecast of -6.2%. Manufacturing inflation also accelerated - up to 0.5%, ahead of the forecast of 0.2%. If the Biden administration manages to push through the Congress new fiscal stimulus (most likely), one of the main foreign beneficiaries of this event will be Japan, which usually outperforms, but only in the early stages of global reflation. This was the case after the 2008 crisis, when the strengthening reached 80 yen per dollar.

Speaking of USDJPY, from a technical point of view, we are approaching the upper border of medium-term downward channel. Based on the bet that the pair will remain the channel (on the basis of fiscal spending outlook for the US), potential reversal zone could be located in the range 104.50-104.70:

Screenshot-2021-01-14-at-17-04-08.png

 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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Three reasons for uneven equity markets growth in 2021


Stock indices of advanced economies rose on Wednesday, large ETFs investing in emerging markets saw moderate inflows on Tuesday. The speech of Janet Yellen who assumes the office of the US Treasury secretary affirmed that not only a short-sighted approach will continue in the US fiscal policy, but it may become even more pronounced. Yellen’s remark about the need to “act big” ignoring growing public debt issues was basically a signal that she, as a head of the Treasury, favors further debt accumulation as a remedy for short-term economic issues. It is clear that the US administration will float new measures to support the economy and the goal is to determine who will benefit from the spending spree.

The SPX has gained 13% since the US presidential election and during this leg of the bull market investors priced in both an early end pandemic, thanks to vaccine rollout, and economic rebound in 2021. However, as we enter in the actual phase of recovery market growth will be likely less uniform and investors will become pickier. 

There are three reasons for that. First, there is a consensus taking shape that growth stocks are overbought: the gap in forward P/E for growth and value sharply widened in 2020 to the highest level in two decades, indicating that investors have accumulated the highest bias in stock preferences since the dotcom bubble:

Forward-P-E-Value-vs-Growth-Stocks.png

 Second, value stocks, which good part is cyclical stocks, are expected to thrive in the coming phase of higher economic growth with premium in their prices gradually dwindling. After unveiling the spending plan from the new administration, Goldman Sachs added 2 pp to the expected US GDP growth and forecasts it at 6.6% in 2021. NY Fed forecast currently implies GDP growth at 6.2% in 2021, with signs of acceleration since December 2020:

NY-Fed-GDP-Projection-High-Frequency.png

Markets probably haven’t priced in this momentum yet.

Third, policy moves from the new US administration should benefit the sectors that will drive economic growth and consumption in the future. This also implies more selective investor approach and a focus on firms and sectors that the government will favor. Biden’s plan for innovations includes increased investments in healthcare and green energy, including a move to electric vehicles, which should secure orders for companies such as GM, Ford and Tesla.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

 

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Reflation bet in the US appears to be gaining traction

US futures and European stocks resumed rally anticipating more bullish updates from the new US administration. We saw fresh highs in S&P 500 yesterday and extension of bullish sentiment in today’s session with SPX futures hitting new peak at ~ 3860 point. Recall that we discussed possible reasons of market participants to increase their exposure in US stocks. Breaking down returns of US equity markets by indexes and taking the start of 2021 as the starting point, we see strong evidence that investors are increasing their bets on reflation (economic rebound) in the US economy:


Screenshot-2021-01-21-at-12-52-05.png

 
The small caps that make up the Rusell 2000 Index posted a combined 9% return in 21 days, while returns of its peers are much lower - 2-4%. It’s well-known empirical observation that small-caps benefit from early stages of pickup phase of a business cycle and recent market developments clearly reflect the efforts of investors to price such expectations. We also see that tech sector has caught up its peers in recent days, most likely because rhetoric of the new administration is dominated by talk about stimulus and, to a lesser extent, about taxes, regulation and scary things for Nasdaq firms. This helped investors in the index to breathe out. Democrats’ discussion about income redistribution, taxes on rich and corporations should nevertheless begin later when risks for the economy subside. 

Consumer prices in the UK came out higher than expected in December, what increased Pound’s appeal in the FX space. GBPUSD saw a brief bout of resistance at 1.37 and from the technical standpoints aims to break through the range with targets at new multi-year highs:


Screenshot-2021-01-21-at-13-16-51.png


The UK economy, or rather the consumer component, judging by inflation in December, showed pretty strong resistance to a lockdown, which is a surprise for expectations.

The Bank of Japan was unable to salvage long positions in USDJPY, although it said it was too early to abandon its policy of low rates and yield curve control. The dovish stance of the Bank of Japan is factored in yen’s exchange rate and attention of investors is focused on another important factor - fiscal stimulus in the United States. Earlier, we discussed why a fiscal impulse in the US could have a positive effect on Japanese assets, and therefore increase the attractiveness of the Japanese currency.

After weak consumer inflation print in Canada as shown in the report released on Wednesday, the Bank of Canada was expected to express concerns, but it turned out exactly the opposite, which caused USDCAD to move down from 1.2990 to 1.2920. Due to the unusual stance of the Central Bank, the movement along the dovish trend in USDCAD will probably remain in force. As a macro factor, persistent upside pressure in the oil market helps CAD to stay strong. Judging by shifts in exposure in the US stock market (clear overweight in cyclical small-caps), we may also see a preparation for a breakout through local highs in the oil market. But let’s not forget that we have US shale sector which is still alive (despite Biden agenda which is long-term negative for US oil) and the US inventories, according to the latest API update rose for the first time in weeks which is definitely a worrying development for OPEC and oil market participants.  

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.


High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

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China – new center of gravity for investors?


Asian equity markets climbed to the levels close to all-time highs on Monday amid expectations that growth in Asian economies will continue to outpace recovery of Western peers. Interestingly enough, the rally in Asian equity markets have notably accelerated compared to US stocks since the start of November 2020:


Screenshot-2021-01-25-at-14-32-26.png

Comparison of returns of US and Asian stocks via performance of two large ETFs
 

Optimism in the Asian market was also fueled by the UN report which showed that China surpassed the United States in 2020 in terms of foreign direct investments (FDI). The rationale behind this is that the United States was doing worse and longer in coping with the sanitary crisis, and would therefore underperform compared to China in terms of the pace of post-crisis recovery. Investments in the United States fell 49% year-on-year, while in China they not only escaped a drop, but also grew by 4%, despite a general collapse of direct investment by 42%.

For East Asia as a whole (China, Japan, Korea, Taiwan) FDI decreased by 4% in 2020, while in developed economies - by 69%.

China's recovery in the fourth quarter accelerated and GDP growth exceeded expectations. The Chinese economy ended 2020 in extremely good shape and despite the continuation of the pandemic is likely to accelerate this year.

Foreign direct investment is an indicator of investor expectations regarding the rate of return that can be expected in an economy over a 5-10 years horizon of investment.

The UN report also supported commodity currencies - AUD and NZD, which through the trading channel are sensitive to changes in Asian economic outlook. They gained 0.3 and 0.5% against the US dollar. In general, trading in the foreign exchange markets occurs today without pronounced trends, since markets are waiting for more information on the stance of the Fed, which will hold a meeting on Wednesday. Investors' focus is on the way how the US central bank will comment on the government plans to once again seek help from the debt market (to fund the next stimulus package). By the way, despite the absence of announcements of monetary easing, Fed’s balance sheet continues to expand and renew all-time highs:


Screenshot-2021-01-25-at-16-30-17.png
 

which supports the stock market and keeps the trend towards compression of credit spreads (markets’ “fear” gauge):

 Screenshot-2021-01-25-at-16-31-59.png

In such situation, it is difficult to imagine what could cause a reversal in risk assets in the near future, where, among the positive catalysts, a new fiscal stimulus in the United States is expected by almost $2 trillion.

The dollar index has every chance of diving below 90 points today, if the vote in Congress on the appointment of Janet Yellen to the post of the head of the Treasury shows strong support from the Republicans. The fact is that in her last speech, Yellen basically said that “while there is an opportunity to borrow (due to low interest rates), we need to borrow”. Therefore, the level of support of Yellen from Republicans will actually reveal the number of headwinds the new stimulus package will meet in the Congress during the voting. 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Why stock markets can fall further, but not for long


The US dollar extends bullish correction entirely on the back of increased volatility in the stock markets. The risk-off on Friday were fueled by an apparent liquidity shortage in China money markets, where the overnight repo rate rose to a 5-year high, presumably also signaling increased credit risk.

The halt of trading in shares that were rampantly bought up by retail investors in recent days calmed markets on Thursday, but today it became known that brokers resumed access to buying, so the hot theme of market cornering and short squeeze of hedge funds has every chance of jolting stock markets again. To justify this, take a look at the following chart:


 mirror-images.jpg

 


It shows the value of two portfolios - stocks which have the highest number of short interest (aka “most shorted stocks”) and stocks - favorites of hedge funds. The indices are completely different in terms of composition of portfolios - the first consists of “losers” according to some market consensus (since they were heavily shorted), while the second – good firms with strong potential. It can be seen that in the last few days, especially on January 26-28, the indices mirror each other - when the value of “most shorted” index rises, the VIP index falls. That is, when retail investors rushed to buy shares of hopeless firms, for some reason market favorites fell. How can it be possible? One of the most logical explanations is that hedge funds were forced to sell their favorites from the index below in order to cover their short positions in stocks from the index above.

From the reasoning above, it follows that if hedge funds failed to reposition and close shorts yesterday when trading were halted, resumption of the opportunity to buy losers could allow the army of retail investors to again push the pros to the wall and this could lead to deeper fall in ‘favorite’ stocks, which, as we have already seen, easily feeds into the broader market, which is quite fragile due to weak news background and proximity to historical highs.

However, it is worth remembering that the macro picture has not changed much. Investors continue expect economic rebound in the first half of 2021. The risk described in the article is unique, so long-term correction, in my opinion, can be safely ruled-out. I consider the 3650 level in the S&P 500 (Christmas lows) as a potential entry point upwards. Unless, of course, the market turns around earlier.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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