Markets remain in full-on risk mode on Thursday despite the US election still being in the balance, with the threat of legal action hanging over the final outcome. After some very whippy price action over the last 24 hours, stockmarkets have seen another impressive rally, led by the Nasdaq which is up by 4% on the day but with the DJI and the S+P also up by 2.5%-3% at the end of the session.  Of particular note, the S&P healthcare index jumped 5.6%, to a record high, while the information technology sector rose 4.3%. Earlier, European indices closed up by between 1.7% (FTSE) and2.5% (CAC40). The ASX had a decent finish to yesterday’s session and the futures are up by another 0.5% in early Australia this morning.

In the FX markets, the US$ has had a wild ride with some big swings in all the major pairs, but by the end of the session the DXY is trading just 0.1% above Wednesday’s closing level. On the crosses, the Aud$ remains underpinned on the short term charts against most currencies, particularly against Sterling which looks set to remain heavy on all fronts as England enters lockdown 2.0, and which will continue until early December, putting further pressure on the UK economy.

The precious metals gyrated but by the end of the day Gold was down by just 0.6% on the day and silver by 1.5%. Oil enjoyed the positive risk outlook, up by another 2.7%, currently at 39.10.

Thursday will largely be spent interpreting the outcome and ramifications of the US election – and hopefully we may see a result – as well as the possibility of legal action, as promised by Donald Trump. That aside, Interest Rate Decisions are due from both the BOE and the Fed, where no immediate change to rates is expected from either central bank although the BOE may well increase the APP programme by £100 mio per month, to £850bio. The Fed are expected to do nothing in terms of policy and the focus from both the BOE and the Fed will be on their outlook, which is set to be pretty bleak.

There will be plenty else besides, although largely lost in the noise coming from the election/BOE/Fed, with the day starting off with the NZ Preliminary November Business Confidence and Activity Outlook and, a little later, the Australian Trade Balance for September. The EU September Retail Sales are also due (exp -1.0%mm, +2.8%mm) and there will be speeches to come from the ECB’s Schnabel and the SNB’s Maechler. The US will be focused on the election result and the Fed decision, while the EIA Weekly Crude Stocks Change will also be released. Have a good day.

Economic data highlights will include:

Thur: NZ Preliminary Business Confidence, Activity Outlook, Australian Trade Balance, German Factory Orders, EU Retail Sales, BOE Meeting/Statement/Minutes/Vote Count/APP Facility/Press Conference, US FOMC Meeting/Interest Rate Decision/Press Conference,

Market moves, in brief:

FX: DXY 93.45 (+0.13%)

Bonds: US10Y; 0.780% (-13.80%), German 10Y; -0.638% (-3.04%), UK 10Y; 0.210% (-4.48%), Australian 10Y; 0.805% (+2.80%), NZ 10Y; 0.585% (+6.69 %), China 10Y; 3.189% (+0.03%)

Stock Indices: DJI; +2.06%, S+P; +2.69%, NASDAQ; +3.97%, EUStoxx50; +2.01%, FTSE100; +1.67%, Shanghai Composite; +0.19%, ASX200SPI: +0.55%

Metals: Gold $1896 oz (-0.67%), Silver $23.87 oz (-1.51%), Copper $3.106 lb (+0.44%),

Oil: WTI $39.45 pb (+2.72%)

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Trend Table: November 5, 2020                                                    

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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility).  The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are ignored for the coming session.

For instance, if we see consecutive green boxes in the  1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required.   The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.

In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.

Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.

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Outlook:

Conditions remain very choppy, but in the short term the US$ looks a little heavy against most of the majors with the exception of Sterling which has its own problems with Lockdown 2.0 set to commence today.

Stocks look set to continue their rally and I prefer to buy dips. In particular, I like the ASX, and in the SPI, currently at 6080, I like to look for a level to be long with a SL placed below the 200 HMA (6025), or preferably below the 100 HMA, currently at 5975. The upside target is at around 6200 but it could be a wild ride getting there.

I would leave the US$ alone today as it is going to be highly volatile and a day for the day-traders. In the crosses, GbpAud looks heavy although it is in the middle of the range of the last month and may just end up being choppy. Overall though I like to sell the cross above 1.8150, with a SL placed above 1.8250 but looking for a dip towards 1.7850 in the next few days.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourNeutral – Turning Higher?Turning Lower?NeutralNeutral – Turning Higher?Turning HigherTurning Higher?
4 HourUpTurning NeutralTurning NeutralTurning Lower?Turning HigherNeutral – Turning Higher?
1 DayTurning NeutralTurning NeutralTurning NeutralNeutral – Turning Higher?Turning NeutralNeutral
1 WeekTurning Lower?Turning NeutralTurning NeutralPossible Basing FormationTurning LowerPossible Topping Formation
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourNeutral – Turning Lower?UpBullish DivergenceTurning NeutralNeutralBullish Divergence
4 HourTurning LowerUpTurning HigherTurning NeutralTurning NeutralTurning Higher
1 DayTurning NeutralTurning NeutralTurning NeutralTurning NeutralTurning NeutralTurning Neutral
1 WeekPossible Basing FormationPossible Topping FormationTurning NeutralTurning LowerTurning LowerNeutral
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning NeutralTurning Higher?DownTurning Higher?Bullish DivergenceUp – Overbought
4 HourTurning Higher?Neutral – Turning Higher?Turning Lower?Turning HigherTurning LowerUp
1 DayNeutral – Turning Lower?NeutralNeutral – Turning Lower?Turning NeutralTurning NeutralTurning Higher?
1 WeekTurning Lower?Turning NeutralNeutral – Turning Higher?Turning LowerTurning NeutralTurning Lower

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