Intraday Market Thoughts Archives
Displaying results for week of Jul 12, 2020Tech Takes Over
The insanity in Tesla's stock price on Monday is indicative of the mood in technology stocks at the moment. The $250 rise in its stock price to start the day was its entire market cap a year ago but that was followed by a $300 drop from the highs. The reversal took many of the high-flying tech stocks with it and the Nasdaq finished the day down 2.1%.
This could simply be another bump in the road in a rally that's spanned months but it will bear very close watching in the day ahead. It's a reminder that this is an emotion-driven market and greed can flip to fear in a heartbeat. That argues for laser focus on risk management.
Watch QQQ SOX XLK
Pay attention to the massive bearish engulfing daily candle on QQQ, Philly Semi Conductors Index (SOX) and the S&P's tech sector ETF XLK. SOX eyes next crucial support at 1998/99, QQQ is vulnerable to break below 256 towards 251. This move could be reinforced if US bank earnings outperform and accelerate the rotation from tech to DOW30 and BKX.Earnings season picks up this week and that will add an extra layer of intrigue.
Looking ahead, the US June inflation report is due at 1230 GMT. The consensus is for just a 0.6% y/y rise in prices but even a significant miss wouldn't rattle the market because the Fed will no-doubt remain accommodative for many months. The detail to focus on will be hourly and weekly earnings, which are forecast to rise 7.4% and 6.5% y/y, respectively. Those numbers highlight the boost from enhanced unemployment benefits and are a reminder of what's at stake if the Fed doesn't extend them.
In terms of the Fed, a speech from Brainard at 1800 GMT will be notable. She was the lone dissenter at the top ranks of the FOMC in the banks' capital plan – preferring to bar large banks from paying dividends --and she could expand on that. Alternatively, she could focus on the economy and lay out her views on what's coming next. She's not afraid to go against the grain and her thoughts are worth heeding.The Virus and the Economy
US handling of the virus has undoubtedly been a failure but the trend in the virus in other developed countries shows it can be tackled. Ultimately, the US will get there and took a big step on Saturday as the President wore a mask publicly for the first time.
In terms of data, the Florida number also wasn't as bad as the headline. The 35% jump in cases came on a 60% increase in the number of tests. As a result, the positivity percentage fell to 11.25% from 12.6%. In Arizona, Texas and California there are early signs of a leveling off in cases and people are undoubtedly practicing better social distancing.
While hospitalizations and deaths will likely rise through month-end, there is a narrow window for the US to lower cases enough by September to successfully open schools.
Pfizer also stoked some weekend optimism with the pharm company's CEO saying a vaccine could be approved in October. After a 1% gain on Friday, S&P 500 futures started the week higher.
The challenge for traders (especially those trading off indices) is to manoeuvre between the news of rising US virus cases and improved chances of finding an effective vaccine. The Premium Insight's WhatsApp Broadcast Group capitalised on Thursday's dip in indices and subsequent Friday bounce here.
With regards to FX, Ashraf is cautioning on the Chinese yuan's rally past the 7.0 level (USDCNY drops below 7.0), sugesting a key inflection point in the USD's next leg down. Recall how last year the 7.00 resistance in USD/CNY proved a stubborn barrier in the face of USD bids, until its break helped paved the way for rapid USD gains against most of currencies.
The focus will remain on the virus Monday with a very light economic calendar. Be advised that most states tend to report the weekly low in virus numbers on Mondays due to weekend testing bottlenecks. That's a factor the market should be better at pricing in but it continue to work.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.EUR +104K vs +98K prior GBP -16K vs -21K prior JPY +17K vs +24K prior CHF +4K vs +4K prior CAD -17K vs -21K prior AUD -1K vs -3K prior NZD 0K vs 0K prior
Euro longs dropped 20K two weeks ago but had a small bounce last week. Aside from that position, the speculative market is reluctant to pile into anything.
