Trump tweets market China

Market Update 25/08/2019

By: Sean Cartwright


We had yet another volatile week in markets around the globe and should be prepared for another shaky start to the week after the way the US equity markets closed on Friday.

This week was a bit more interesting as we saw Trump jump on Twitter post Fed speech, after Fed chair Jerome Powell said Trump’s policies were a big problem for the Fed. Trump then launched quite the thread against China and again reiterating that we are further from a trade deal than ever before.

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Equities

Not much to say here except that global equity markets look bad. Still times for very low exposure, I am holding some very small positions in some local names which I expect will see some selling come tomorrow.

Final week of reporting season and there are a few key names that I will be watching out for:

Monday 26th:                FMG IFL GEM BLD

Tuesday 27th:                WES ING CTX

Wednesday 28th:           BAL APT OZL

Thursday 29th:              WOW LNK ABC IGO APX

Friday 30th:                   RHC REH NST

On a more technical note for those interested:

US market (S&P500, daily chart): I am seeing this as the third test of the 200-day moving average (black line, a key support level), another down day on big volume is cause for concernScreen Shot 2019-08-25 at 10.01.10 pm.png

Australian market (XJO, daily chart):

As mentioned last week, we needed to see price move above the key support on the weekly chart and while we had an encouraging start to the week, Friday’s action meant a poor close on the weekly. Below is the XJO daily chart, I am seeing that a test of the 200-day moving average is on the cards (as mentioned above the US is currently sitting on that level) which results in about 2% downside index risk here short term. The way the US acted on Friday leads me to believe that we may even open at that level tomorrow morning.

Screen Shot 2019-08-25 at 10.01.57 pm.png

If these support levels blow apart with ease, there is no doubt we are in for a rough end to the year in equities.

Commodities

Gold (+2.53% for the week)

With the US market being hit on Friday, naturally we saw an increased demand for Gold. Gold moved +2% on Friday and continues to trend very nicely. Right now, gold is being bought on all the pullbacks and our producer (even some speculative) names are seeing some big money flow into them. As such I’d expect to see those names to see some good action tomorrow morning. Gold looking very strong.Screen Shot 2019-08-25 at 10.02.44 pm.png

Nickel (-3.13% for the week)

Finally saw a pullback in the Nickel spot price, and as a result I will be keeping a close eye on Nickel names this week. Nickel has moved with real alpha lately and I expect that this pullback will be bought by big money. Nickel is a battery metal and I assume speculation around EV technologies and supply/demand issues are a key reason for this strength.Screen Shot 2019-08-25 at 10.03.23 pm.png

Iron (-3.33% for the week)

The Iron Ore price is now down ~30% in under two months. Only noteworthy due to the fact it is now at those key support levels and had a small bounce from my trendline on Friday. I’d like to see some bounce here and some buying coming in, given the uncertainty in the markets I think it is likely that any bounce will be short-lived and shorted into. ASX Iron Ore miner, Fortescue Metals, is reporting earnings tomorrow.Screen Shot 2019-08-25 at 10.06.29 pm.png

Forex

AUD currently trades 0.675 US cents and 0.606 Euro cents.

Pretty boring on the FX front this week, only high volatility events worth mentioning would be the Euro CPI figures and US GDP numbers, both towards the end of the week. Australian building permit numbers from July will come out on Friday but that’s more interesting to me as a personal interest in housing fluctuations and isn’t likely influence the FX markets.

Quick update on 20-year bond call from last week

Last week I mentioned the 20-year bond at a major resistance, and that I’d expect some selling. We had a small pullback but given the weakness in the equity market on Friday, TLT had some good action. Below I have drawn on the chart what I’d like the price action to do if we are to have a breakout in the chart. Given the strength of the chart, it really could break that resistance.

Screen Shot 2019-08-25 at 10.15.43 pm.png

Have a nice week all, trade well.

(If you enjoy my thoughts and charts you can follow my twitter (@sfcartwright) where I post more regularly)


Sources: Bloomberg, Commsec, Financial Times, FXStreet, ProRealTime

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