Delta1trader Technology - Daily Market Report

[Delta1trader Technology]

Market Report Tuesday 7th of April 2020



Big risk on rally yesterday and it continues this morning. Was huge volume on the break higher into the close last night, so it looked apparent that the shorts were stopped out and the move higher was also a lot of short covering. We have now basically retraced 50% of the down in most US equity indices. To me it looks like the market is front running this risk on. The outlook now is that things will work out very smooth and the Corona virus is pretty much going to be a smooth solution. It might be a bit aggressive until we see more data supporting that fact in, especially NYC. It also looks like short sellers are covering their positions ahead of the Easter Holiday. I think it will be a bit more problems ahead of us and looking at several European countries it has taken several weeks to see the light at the end of the tunnel on the corona outbreak. It looks like in general that it will be important to keep the approach flexible and accept that the equity market could easily move back towards the all time highs seen earlier this year or it could also fall below this year’s low.

Gold is made it up to 1712 this morning but was not able to hold the 1700 level and it now back towards the day’s low at 1693.

Another thing to note is that the correlations between different assets are a bit all over the place over the last couple of days. So, I think that indicates the market is just very confused how to price different assets at the moment. Today’s will be very interesting to see if the market can hold the gains created over the last few days. That is going to be key to avoid a fall back to test the breakout levels from yesterday.

Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Wednesday 8th of April 2020



We saw wide ranges in most markets yesterday with some interesting reversals in both equities and gold. Gold futures topped out at 1742 and move back below 1700 rather quick. It since tested and held 1670 support. So, the key levels for now remains 1742 resistance and 1670 support. A break out of this range is interesting. Nasdaq futures traded to 8303 and failed, following the nice rally last 3 days. It now looks to me that the risk on rally over the last 3 days was overdone on lots of comments from different sources how the Covid 19 virus data was looking better and put simply that it will all solved with lots of stimulus money. I think we are far from that point and with both the France, Spain and US numbers continue to be very high. With a neutral look at the COVID 19 data of new cases and death, I just don’t see any huge improvement. Therefore, I think smart money sold into the rally and looking to buy back lower after the high’s yesterday pretty much was around the 50% retracement level of the move from this year’s high to the yearly low. I would not be surprised if we move even lower in the next few trading sessions.

Another very interesting subject is crude oil and OPEC + meeting tomorrow. It looks to me that Russia holds the best cards going into the meeting. Russia break ever for their economy is about 40 USD per barrel, while Saudi is more like 58 USD per barrel. Meaning that Russia can live longer with lower prices than Saudi could. Then of course FX reserves and other factors play into the equation, however it gives me a simple outline of who would be more interested to see bigger cuts, meaning Saudi. I think we need to see an agreement to cut at least 10M barrels per day to avoid Crude going much lower. Anything less I would not be surprised to see crude trade below 20 USD per barrel. A cut of 15M per day would mean a substantial rally and likely a move back above 32 USD per barrel in my opinion. Iran will likely not cut anything since they are under sanctions and China is not doing anything. Iraq is mostly an ally of Saudi, so they will likely follow what the Saudi will do. Meaning, the big play is really going to be between USA, Saudi and Russia. So watch out for comments from any of those countries. The top 6 producing countries in the word account for 60% of the total output of 80.6M barrels per day:

USA – 15M barrels

Saudi – 12M

Russia – 10.8M

Iraq – 4.4M

Iran - 3.99M

China – 3.99M

Total of 50.18M

Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Thursday 9th of April 2020



This morning I see more news of extended lock down period across Europe. The amount of new Corona virus cases rose in Germany, which is a bit surprising to me as it looked, they had things going the right way. However, we should not make too much of a day’s single number. Equities is slightly down at the time of writing, but that top from Tuesday is still in the background containing further gains for the moment and below we have a good break out from the previous range. So, at the moment it looks like sideways to lower prices is most likely. I still think that there were plenty of sellers in the equities on the highs Tuesday, so if that level holds, this is still just a bear market rally. If, we were to trade above those highs it would be more looking like a V shaped bottom. FX markets are quiet so far today. Gold is holding key support at 1665 so far today, but still not able to recover back above the 1700. We have the OPEC + meeting later today and as I outlined yesterday:

It looks to me that Russia holds the best cards going into the meeting. Russia break ever for their economy is about 40 USD per barrel, while Saudi is more like 58 USD per barrel. Meaning that Russia can live longer with lower prices than Saudi could. Then of course FX reserves and other factors play into the equation, however it gives me a simple outline of who would be more interested to see bigger cuts, meaning Saudi. I think we need to see an agreement to cut at least 10M barrels per day to avoid Crude going much lower. Anything less I would not be surprised to see crude trade below 20 USD per barrel. A cut of 15M per day would mean a substantial rally and likely a move back above 32 USD per barrel in my opinion. Iran will likely not cut anything since they are under sanctions and China is not doing anything. Iraq is mostly an ally of Saudi, so they will likely follow what the Saudi will do. Meaning, the big play is really going to be between USA, Saudi and Russia. So watch out for comments from any of those countries. The top 6 producing countries in the word account for 60% of the total output of 80.6M barrels per day:

USA – 15M barrels

Saudi – 12M

Russia – 10.8M

Iraq – 4.4M

Iran - 3.99M

China – 3.99M

Total of 50.18M



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Tuesday 14th of April 2020



The equity market is in rally mode today and we are approaching some key resistance levels in several equity markets. It looks now like the equities is pricing in a V shape recovery and the Corona situation is basically already solved. I still see large potential risk that this Corona virus situation can last for quite some time. It looks like lots of the cheap money is being channeled back into stocks based on the concept that it is no other place to place the funds. Not sure this is the right strategy at these levels, because there will be fall outs in several sectors before this crisis is over. Oil sector is in big trouble and the demand side is likely to stay low for quite some time. Very few that will book any major Holiday in the next 6-12 months with the current outlook being so unclear. The OPEC+ deal avoided a total melt down short term for the oil price, but it looks like it is not enough to really get prices back above 30 dollar per barrel, which is key to avoid a round of bankruptcies in that sector over the next 3-6 months. IMF projection is for a decline of 3% in world GDP in 2020, then a 5,8% growth in 2021. To me that sounds way over ambitious in terms of the 2021 numbers. It all looks like the Central Banks as desperate to keep the assets prices up and protect the banks balance sheets to avoid a systemic crisis, which it the only strategy that makes sense now. However, it is also a risky play, there are limits for how much debt that can be piled on without the risks for total collapse rising sharply. We also must remember that a lot of small business are not making any huge profits, but marginally positive and employees a good amount of people. Most of these firms cannot add a lot of debt, since they would not be able to pay it back. Logically this can create a hazard system, where all the debt being piled on now to keep business afloat, which be sunk cost as the small business realize it cannot be paid back and they just prefer to bankrupt and start again fresh. Meaning the taxpayers are left taking the loss. Bottom line is that equities can still go much higher, however I think the risk to reward is not favorable buying at these levels now.

As for the current Macro picture, gold should outperform and I think we will see the 2200 level in the not too distant future.



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Wednesday 15th of April 2020



The market is lower this morning following a big rally over the last days. As mentioned yesterday, the US markets hit major resistance late last night and a correction lower is expected. At the levels seen last night it looked like the market was pricing in that corona would be solved nice and smooth, which I don’t think is that likely. I will take quite some time before things are back to normal and we will see fall outs in the meantime. Key now is to hold the rising trendlines on the S&P500 and Nasdaq 100 to avoid a reversal much lower. It would be well in the context of normal price action to see a retracement of at least 38,2% of the recent up move, so that would actually be 8218 on the Nasdaq 100 futures and we are trading 8572, meaning some distance lower actually. Given how volatile this market is, that could happen in one day or two.

I want to bring the attention to Gold, because given the current macro with huge QE and rising debt, hard assets like gold should have potential to do really well. I think 2200 level should be very reachable in the next few months. However, I also feel that the long Gold trade is getting more and more crowded, which also means that you can expect more sell offs to make life hard for the buy and hold players. This means that shorting breakdowns could work quite well going forward, along with buying dips.

US dollar is bid this morning also, pretty much on increase risk aversion looks like.



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Thursday 16th of April 2020



Equities are back up this morning, following a volatile session yesterday. We had a decent correction lower yesterday in the equities following the big rally over the previous week. I pointed out over the last few days that it looks like all the good news is priced in already and we also see lots of positive comments from the politicians all over the world that things will work out great. However, I think the outlook really depends on getting a vaccine to the market relatively quick. There is no way the economy can sustain being locked down for another 4-6 weeks in the US.

Crude is also below 20 USD this morning and it is clear that the OPEC+ cuts is not enough to make the oil prices rally, at least not yet. The crude inventory data was not very bullish either, so nothing really stands out at the moment to make crude jump much higher. We had news out last night that the US Energy Dept drafting a plan to cut US oil output by paying drillers not to produce. Again, more support packages that will cost the taxpayers money. The free market concept is long gone out the window, it is all Central Bank driven following the Financial Crisis. The politicians and Central Banks are micromanaging the economy and it will most likely just get worse going forward. The debt is so high that any small fall out can break the whole system. That means it is imperative to keep assets prices up and the large amount of QE put in place of the last weeks is basically making the US equities rally, because money have to be put into the market.

I want to bring the attention to Gold, because given the current macro with huge QE and rising debt, hard assets like gold should have potential to do really well. I think 2200 level should be very reachable in the next few months. However, I also feel that the long Gold trade is getting more and more crowded, which also means that you can expect more sell offs to make life hard for the buy and hold players. This means that shorting breakdowns could work quite well going forward, along with buying dips.

US dollar is generally slightly stronger this morning.



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Friday 17th of April 2020



Good morning, we have OPEX today, which is options expiration. I will keep it short and crisp today.

Some news out last night that Gilead could have a drug that could work for treatment of Covid19, I don’t know the specifics to really comment that in detail, but overall the Nasdaq (new internet based economy) is outperforming the old economy big. The Payroll Protection Program is out of money already, auch that was fast. Basically, means that this lock down is way too expensive and cannot be going on for much longer. I have been saying for one week now that I think there will be major fall outs if the economy is locked down another 4 weeks, so that is another 3 weeks left. I also think the opening process will be slower than expected and the equity rally is way overdone. My view right now is; long gold on dips and sell small cap equities on short set ups. Crude oil is still weak on very weak demand, think that will continue for another 3-4 weeks until the economy is starting to open up. So could be interesting to start looking at buying some oil in the next few weeks, but more like buy dips and then take profit on spikes.



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Monday 20th of April 2020



Good morning, we are seeing the light at the end of the tunnel of the COVID19 lock down in Switzerland. The outline is for a gradual opening, starting 27th of April through 8 June when it should be back to more or less normal terms. All depends on the development in the next few weeks towards the 8th of June if in fact that timeline will be kept.

Back to the markets, this morning US equities is slightly down in European morning trade with crude oil trading below 15 USD per barrel overnight. I am hearing that Texas oil is sold as low as 2 USD per barrel in the physical market. If the physical market is that low, it means it will be hard to get crude prices much higher in the near term. We must see demand side coming back and the consumption come back to be able to get any real recovery. USDCAD should remain bid with low oil prices.

The equity markets have a low volume area 3-5% below current price that was left unexplored when it broke higher, I would not be surprised if we see a bit of back and fill in the next few week and potentially lower if this area would not hold.

I also think the COVID19 will take a bit longer to get under control for the US and for things to open properly the death rate must fall quite some more. Still looks like small cap stocks have the highest risk for now. Oil stocks is in big trouble and could easily see a big fallout over the next weeks.

Gold looks bullish above 1680 for now and the big level to get above is 1800.

Crude looks weak below 24.60



Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Wednesday 22nd of April 2020

Good morning, we have another beautiful day in Zug, with 22C and sunshine, looking forward to the summer and the economy opening up gradually starting Monday.

We have Crude oil inventory data today, what will be the focus of the day. We still have very wide ranges in Crude and yesterday we saw a low of 6.50 in the June contract after starting at around 20 USD in the morning. Absolute crazy, however the market is just trading the crude storage idea and the structure of the USO ETF and nothing to do with anything else. For longer term prices in crude to really start adjusting higher we need to see the demand side start coming back. Meaning it all depends when the economy around the world starts working more normal. My take is that will take some time. We have the EU summit going on and it will be more QE, just a question on how much it will end up being and the format.

Equities have been correcting a bit as expected over the last few days on outlook being more unclear when the US economy can open up. I said max 4 weeks to avoid major fall outs, there is no way the US can afford paying people to stay at home for long. We have 3 weeks left I think.

For today, Gold looks good following the bounce from 1670 yesterday, need to see a break above 1740 to get things really spiking higher. I am looking for gold to trade above 2000 in the next few months and at least get to 2200 over the medium term.

Equities I expect a more balanced session and prefer to sell rally into the overhead resistance.




Happy Trading

Erik – Delta1Trader Technology

 

[Delta1trader Technology]

Market Report Thursday 23rd of April 2020



Crude have been all over the place over the last week and we have resistance coming in at 16 USD and a break above this level would open for a move back towards former key breakdown level of 20 USD. Crude inventory data was not that bullish yesterday, so that should put a bit of a floor below the crude price for the next few sessions.

Gold looks good and we tested key resistance at 1754 this morning and a daily close above this level would target 1768 followed by 1788 and the eventually 1800 and higher.

In the equities market we have the bears and the bulls fighting hard to swing this market in either direction. One side you have massive QE and the other side you have huge fallout in the economy that could lead to bankruptcy spiral and several ripple effects over the next few years. We have had 9 out of the last 10 days being directional in the US equities market and I expect to see more a range markets for next few sessions, meaning the price is moving around the VWAP through out the day.

 

[Delta1trader Technology]

Market Report Monday 27th of April 2020

There is more Central Bank action this week and the Bank of Japan already started Last night the BOJ increased purchases of corporate debt and removed caps on sovereign debt. The ECB and FED meet this week as well and is expected to issue more whatever it takes to support the economy. On another note, we have earnings from Google tomorrow, which should be very important for the Nasdaq, if the markets really care about earnings at all at the moment? The equities market is up big overnight and most of the gains in the US markets have actually come overnight for the whole month. This month’s market action is very unusual and most days have been one sided days, with a gap up overnight and trading on that side of the unchanged for the rest of the day.

Gold went above 1760 Friday morning and has since retraced back to 1730, good support at 1720 for today. Still favor buying dips in Gold for a move above 2000 in the next 4-6 weeks. I expect weakening USD as a result of huge QE, which should lead to higher prices of hard assets like gold.

Crude oil is down below 15.65 key support this morning and I expect more pressure to the downside towards the key support around 10.30 over the next few days and this should also put pressure on Canadian dollar in the next few sessions.

 

[Delta1trader Technology]

Market Report Tuesday 28th of April 2020



We have turn around Tuesday today and I expect to see some reversal movements in US equities. Equities is higher this morning and the small caps outperformed FANG stocks yesterday as funds were flowing out of FANG into anything else basically. The economy is starting to open up several places and it looks like things are getting back to order slowly. However we also had another oil company filing for bankruptcy yesterday, Diamond Offshore. So, I think we still see more bumpy market moves for quite some time. Focus is turning to the FED and the ECB this week and I think it will be focus to keep providing liquidity and do whatever it takes to support the economy. I said max 4 weeks to avoid major fall outs, there is no way the US can afford paying people to stay at home for long. We have 2,5 weeks left to get things back towards a bit normality to avoid further fall outs.

The gold is lower over the last few sessions and tested 1705 support this morning and it looks like month end balancing causing the selling. I think it could provide a nice buying opportunity for a move back to 1730 to 1750 later this week.

Nasdaq testing the overhead 8950 resistance again this morning and given the economic uncertainty US stocks are very expensive looking at next year’s earning projections. I also think the earnings projections are too high and have to come down as well. So, logically it should move lower from here the next few weeks and more and more analysts downgrade earnings.

Crude did test that 10.30 support level that I outlined as the downside target for the down move and bounced nicely back to above 12.50 and we could well rally all the way towards 15.64 key resistance. Looks like the crude June to August contracts are trading purely on inventory data and storage capacity.

US dollar is weaker across the board on more QE coming from the Fed, however I think this will reverse a bit later in the week, especially USDCAD looks like it should be higher with the current oil prices.

 

[Delta1trader Technology]

Market Report Wednesday 29th of April 2020

The focus will be on the FED meeting tonight and it is the first meeting for a while following the emergency cuts over the last few months. Expectations are low for any further moves on rates by the Fed for the next year or so. The press conference following today’s announcement will be important and Fed’s Powell can get the market moving substantially as he will stress the key points, he wants the market to focus at. The guidance will be key tonight regarding the future economic and rate outlook. The FED could have a 12Trillion balance sheet next year. The concept of unlimited QE is likely to remain the key theme and it looks like the equity markets have been front running this outcome and I would not be surprised to see a buy the rumor and sell the fact type of concept. Meaning, I am looking for a spike higher to sell into on the announcement.

The unlimited QE should be supportive for Gold and stocks, while it should be bearish for the US dollar.

The crude oil is looking better this morning as we are back above 14.20 resistance and we have scope for a move towards 15.64 key resistance. A break above 15.64 resistance would be opening for a move towards 16.80 area, where there is prior high volume traded and this should hold further advances for now.

Another thing I noted this morning is that the USDCAD has broken lower and now below 1.3950 and is outperforming the USD even though the Crude oil prices have been very weak. I am thinking this should reverse once we get past the FED tonight and could be back above 1.40 towards the end of the week.

 

[Delta1trader Technology]

Market Report Thursday 30th of April 2020


The Fed announcement was dovish yesterday as expected and they will do whatever they can to support the economy. The ECB followed up today with a similar type indication and will also do whatever they can to make sure Europe does not fall apart. The Fed has now pumped over $10 trillion into the markets through fiscal and monetary actions, creating huge support for the equity markets over the last month to rally 20%. Even though there are 20 million. The price action in April have been very weird. As of yesterdays’ close, 85% of the gains have come from gap opening during the month.


The move above 9140 in Nasdaq 100 futures overnight looks way too much in my opinion. I think the next leg should now be lower as we have lots of gaps below us that are open. My first target would be for a move down towards the high-volume area around 8715. I still think that it will take time to resolve the COVID19 fall out and to me the equity markets is pricing in way too fast of a recovery. There is also a good amount of risk that the virus will pick up again when the economy is opening up again. Therefore I think it will be more bumps ahead of us and not smooth sailing like the US equities are pricing in right now.


Crude oil is looking bullish above 16.30 now and the next big target to the upside is 20.50


Gold was rejected towards 1738 overnight and looking a bit like month end flows is keeping it offered or could also be due to the fact the Venezuela is selling off their gold holdings to support the economy.


USDCAD tested 1.3850 this morning and it looks like it should be higher with weak oil priced should weaken the CAD. That correlation has not been that strong this week, but should resume next week I reckon.

 

[Delta1trader Technology]

Market Report Friday 1st of May 2020


European markets are closed today and the liquidity has been poor in the overnight and European sessions. Crude oil have been jumping around last 24 hours and there is lots of sudden spikes and drops, so the volatility to trade is certainly good, however the random volatility expansion makes it a bit hard to get volume through. We have big resistance at 21.64 and I expect this level to the be defended by the sellers and a normal move would be to test back toward the breakout level of 18.26 near term. Today is the first day the new OPEC agreement is effective.


Gold is looking good and it held 1676 support and a move back above 1700 would be bullish for a test of 1715. If 1715 is broken I favor a run higher towards 1780 short term. I still think Gold will be trading above 2000 level in the next 4-6 weeks.


Earnings out of Amazon and Apple were both decent last night, but with the current high pricing of the equity markets it was not enough to avoid a sell off. As I have outlined numerous times over the last week, that recent rally up above 9100 in the Nasdaq futures looks excessive compared to the actual risk of earnings underperforming massively this year. Therefore, I favor a move lower from here in Nasdaq, S&P 500 and Dow Jones indices over the next 2 months. I think sell in May and go away is going to be a factor this year.


USDCAD broke the downtrend yesterday and not is targeting 1.4050 followed by 1.4120. In risk off environment the CAD should underperform, especially with the Crude oil trading below 21.46 resistance.