Back in the chair, in front of a bank of screens and keyboards and properly motivated for the next stint of trading through to the Summer break on July 17th, 2020.
The big news would appear to be that apparently economic data doesn’t matter anymore. All of the recent economic data that we have seen is simply for the record books, a historical point of reference. The markets have decided that because politicians are relaxing isolation and social distancing regulations and opening up economies again everything is now viewed as a buying opportunity, STOCKS RIP, NASDAQ AT NEW HIGHS, IT ALL SOUNDS SO PEACHY.
It would appear that it’s a total BOLLOCKS response ...
- to poor company valuations
- to mass unemployment (over 33million claimants in U.S)
- to records amounts of debt
(U.S. National Debt over $25T increased over $1T in last 30 days)
- to a worldwide recession
- to some of the weakest PMi prints ever internationally.
Basically, the assumption is – all the negatives can be shoved where the sun doesn’t shine, because Central Banks are here to backstop everything....
- ADP data was released -20.2 million jobs lost, the worst ever data. The S&P barely moved.
- Weekly Jobless claims another 3 million, U.S. now has over 33 million people claiming unemployment benefits.
- States are going bust; some are already insolvent.
- Last Friday Non-Farms data reported a loss of 20,500.000 jobs slightly better than anticipated but the number will catch up next month as this number was only correct to the 12th April 2020.
There is a belief that when shops, hotels and restaurants re-open all will be good very quickly. Some of the projections put about a 2020 recovery are versions of children’s fairy tales.
- How many restaurants can open at maximum 25% capacity and make money?
- How many hotels can open with massive overheads and NO bookings in the diary and make money?
- Airlines are furloughing staff and are not planning to return to any semblance over 50% of a full schedule that we would recognize until after 31st October at the earliest.
- The U.S. this weekend has 44 states lifting restrictions and starting to return to work. 40 of the 44 states do NOT meet the criteria set out by the CDC about re-opening targets. It is obvious that in the TRUMP ERA life has aa acceptable price.
- Basically, would you open up a business right now to lose more money?
I get it...
A return to the new normal 2.0 has to start and It has to start somewhere, I get that, but we could be bringing something worse upon ourselves after just 6/7 weeks of isolation. A second wave of Covid-19 which many scientists predict is a given, will by all accounts be worse that what most of us are STILL experiencing.
There are still people who believe the S&P500 is a fair representation of the state of the economy. It may have come to a reflection many years ago, but since Bernanke in particular, and with launches of numerous QE (Quantitative Easing – Bond Buying etc.) programs, the financial markets were manipulated and subsequently they have remained manipulated and reflect nothing close to the state of the economy. A roulette wheel in Las Vegas is just as close!
In the past week weeks, an infantile ego maniac President was talking about injections of Dettox / Clorox as a probable Covid-19 cure. AFTER 911, IT WAS SAD & TOGETHER; NOW IT’S JUST PITY, this is the view of many around the globe reflecting on how the U.S. moved forward from 911 to having TRUMP in the White House. It has been well documented over the past weeks, to elect him once can be seen as a mistake but to re-elect him makes the U.S. nothing more than a laughingstock. This man is who America trust to lead them through a crisis... it really beggar’s belief.... it’s very sad.
As I have stated many, many times before, the market is what it is.
Institutional investors only have one place to go for yield to satisfy the needs of their clients. They buy up equities on dips and keep the upward trend in place. No matter how sick I find the BULLISH SENTIMENT as a trader I have to run with it when planning and scheduling trades.
Many people can take comfort in the that fact that “Oracle of Omaha”, missed the bottom, however, he will have his day.
We are as usual in a buy the rumour sell the fact...
We hear election rally-style news of stimulus and positive news about vaccines that are at least 12 months away. This will give way over time to reality: -
- Continued Social Distancing rules.
- Issues with supply of raw materials and finished goods.
- Calls for Austerity and budget caps.
- Taxation implications on direct and indirect taxation.
For these reasons, as the market reality sets in, I do believe Buffet will be back...
On the news overview let me close with this thought, and just think about it for a few moments.
In 2019 90% of U.S. GDP was consumption based. In the name of sanity who is going to spend money in such uncertain times, we have 33million out of jobs, partial re-opening with many people afraid to venture out, or send their children to school.
The U.S. lives on Credit Cards.
A V-Shaped recovery, I think not; there is more chance of HELL FREEZING OVER.
Despite the state of the world we have as FX traders some awesome opportunities ahead of us.
However, our FX trade selection will never be as important as it now and for the next few months. Whilst the equity traders will have you believe it’s RISK ON, a V-SHAPED recovery its just NOT that simple and straightforward. Nothing ever moves in a straight line and there are huge, economic risks that I mentioned already that need to be assessed and taken into consideration with the strategies being implemented over the coming weeks by Governments around the world.
How are the massive government debts going to paid ... by rampant inflation?
More of that in the coming weeks, for now what trades?
On Friday before NFP, I advised WEEKLY FX PREMIUM subscribers that I removed my long USD/MXN limit order that was stacked to trigger at 23.8000.
Why did I do this given that we were expecting such a poor NFP number?
- The fact we were expecting a poor number was a reason and also the simple fact futures were up over 1% ahead of the data.
- With the above in mind I expected RISK ON.
- USD/MXN long, is a RISK OFF trade.
- We are in a mindset where the Central Bank will support the S&P.
- “BUY THE DIP” is back for equity traders. It won’t last long for reasons highlighted above.
- I removed a short AUD/USD trade for a 70-pip loss just after the data was released when it became apparent the USD was going to be taken to the woodshed.
- For NFP day. I basically did what I always do, and I stepped aside.
Short and Medium-terms I expect equities to rally, however reality will set in at some stage. There are only so far investors can keep faith with loss making companies and a global recession, no matter how BULLISH politicians can sound.
The $64,000.00 question is what will be the trigger to start the pullback?
- CHINA TRADE DEAL – phase 1. As I understand it CHINA in the 5th month of the year has only completed about 18% of its commitment under the agreement. There is plenty of catch up to do.
- PHASE 2 of the Covid-19 pandemic coupled with another OIL price slump.
- Recession or Depression economic data
- BIDEN showing a lead in the November Presidential election polls.
Whatever it is that triggers a reversal, I have a feeling it could trigger a domino effect, that will be RISK OFF.
The next $64,000 question is with ALL the market manipulation by the Central Banks an equity market crash is not on their agenda, but they may not be able to push institutions to buy failing companies.
What happens then?
Central Banks introduce a new level of QE (Quantitative Easing) by buying equities.... that would bring in the end of the world as we know it....
FX - FORWARDS, BACKWARDS & SIDEWAYS:
1: - USD INDEX (DXY) TRADE CHART and MY THOUGHTS:
(The Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart)
MY SHORT-TERM BIAS: Neutral
MY LONGER-TERM BIAS: Bullish
2: - USD MAJORS - TRADING CHARTS and MY THOUGHTS:
3: - THE WEEKLY FX PREMIUM:
3.1: FX PREMIUM MONTHLY PERFORMANCE:
3.2: WEEKLY FX PREMIUM SUBSCRIPTION INFORMATION:
The WEEKLY FX PREMIUM is my subscriber based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
If you go to my website https://www.weeklyfxdrivethru.com you will see more information about the WEEKLY FX PREMIUM.
Lots of information about the way I do things, plus, previous reports about my trades, my trade styles and my trade projections for the year are located on my home page by selecting the appropriate tab located at the top of my home page.
It is a low-cost way to maybe “KICK START” 2020; 3 month’s (10 weeks) subscription in CAD$450.00 equals approximately: -
CAD = CAD$450.00 (CAD$ 45 per week)
USD = USD$340.00 (USD$ 34 per week)
EUR = €310.00 (€ 31 per week)
GBP = £265.00 (£ 27 per week)
AUD = AUD$500.00 (AUD$ 50 per week)
NZD = NZD$520.00 (NZD$ 52 per week)
JPY = JPY 38,000.00 (JPY 3,800 per week)
CHF = CHF 340.00 (CHF 34 per week)
In addition, details about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page under the “SUBSCRIBE” tab.
4: - WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
5: - THE FINAL SHOT:
A couple of news events stand out this coming week, but as I am now saying most weeks, It is Covid-19 headline news that will be driving the price action.
- NZD: ANZ Business Confidence.
The last reading was -66.6.
If we are worse this time around this will affect the NZD and should be bearish. Given the fact that the NZD economy is being re-started soon maybe confidence will be better than last time. Having said that export confidence should remain challenged.
- USD: CPi and Retail Sales.
This will be challenging, and I am NOT so sure that poor numbers can be spun. Having said that with over 20 million out of a job, equities rally, it just shows how detached Wall Street and Main Street are.
These numbers should be the start of reality.
- AUD: Jobs Data.
This will be a market mover. Expect BAD DATA.
- NZD: RBNZ Monetary Policy and Interest Rate Statement with a Press Conference.
Could be a surprise cut lower although it is NOT expected.
- USD: Continuing Unemployment Claims.
The best reflection of the current state of play in the U.S.
This will be eagerly awaited.
5.2: CLOSING THOUGHTS:
Finally, as usual…
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
Finally, Be GRATEFUL for your wins and COUNT THEM. Be positive, keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
Self-isolate and stay safe...
The Pip Accumulator
BLOG VERSION: #366 FREE NEWSLETTER
DATE: 10th May 2020