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TRACKRECORD DAILY

Markets to Consolidate for Now

The fundamentals of relentless money printing will eventually re-exert and help the price of hard assets to grind higher.

Sentiment in the stock market stabilised further with tech stocks leading the way. It seems that the panic selling has ended for now. However, with no significant impetus either way, the market is likely to consolidate for a bit. Precious metals had a relatively quiet day as the weak longs are likely to have bailed.

The fundamentals of relentless money printing will eventually re-exert and help the price of hard assets to grind higher.

TRADING PLAN

  1. Gold & Silver — Support for Gold is at 1850–60 is holding for now. Support for silver is at 21.80–90. Finally a day of positive price action. Weak longs likely to have mostly been washed out.

Key risks — US equity market weakness , and USD yields going higher with strong USD remain signs to be wary of. Risks previously highlighted remain on the horizon.

WHAT HAPPENED YESTERDAY

Market Movements as of New York Close 25 Sep 2020
  • U.S. Durable goods orders increased 0.4% m/m in August (expected +0.9%) following an upwardly revised 11.7% increase (from 11.2%) in July. Excluding transportation, orders were also up 0.4% (expected 1.0%) following an upwardly revised 3.2% increase (from 2.4%) in July. Order increases were seen across most categories, as manufacturing needs continued to recover from their pandemic depression, yet total orders are still down 11.3% yr/yr (down 3.0%, ex-transportation).
  • Dollar gained ground on Friday and chalked its biggest weekly gain (+1.85%) since early April as investors worried about a slowing economic recovery, rising coronavirus infections in Europe, uncertainty about U.S. stimulus, and the upcoming elections.
  • S&P 500 gained 1.6% on Friday in a technology-led advance, ending a negative week on a high note. The Nasdaq Composite rose 2.3%, the Dow Jones Industrial Average rose 1.3%, and the Russell 2000 rose 1.6%.
  • On no specific news, Apple (AAPL 112.29, +4.07, +3.8%), Microsoft (MSFT 207.82, +4.63, +2.3%), and NVIDIA (NVDA 514.95, +21.03, +4.3%) assumed their old leadership roles. The gains broadened out to ten of the 11 S&P 500 sectors by the close.
  • The cruise line industry, meanwhile, could be on the verge of an inflection point, according to Barclays. The firm upgraded Royal Caribbean (RCL 64.59, +4.62, +7.7%), Carnival (CCL 15.07, +1.33, +9.7%), and Norwegian (NCLH 16.63, +2.00, +13.7%) to Overweight from Equal Weight on a favourable risk/reward profile.

HEADLINES:

TRUMP SAYS U.S. ELECTION WINNER MIGHT NOT BE KNOWN FOR MONTHS

Trump said on Friday that Americans might not know the winner of the November presidential election for months due to disputes over mail ballots, building on his criticism of a method that could be used by half of U.S. voters this year.

Election experts have said it might take several days after the Nov. 3 election until a winner is known as officials will need time to count mail ballots that arrive after election day.

Speaking at a rally in Newport News, Virginia, Trump said he would prefer to find out quickly whether he won or lost, rather than wait for the mail ballots to come in.

Trump in recent days has refused to commit to a peaceful transfer of power if he loses the election to Democrat Joe Biden and has said he expects the Supreme Court will have to declare a winner.

Thematic Context:Trump refusing to leave office risk: A possible black swan event that is possible given the contentiousness of the race and a possibility that counting of mail-in votes may delay the result on Nov 3.” — 21st Nov 2020

TRUMP PICKS BARRETT AS HE MOVES TO TILT U.S. SUPREME COURT RIGHTWARD

Trump on Saturday nominated Amy Coney Barrett to the Supreme Court, and she pledged to become a justice in the mold of the late staunch conservative Antonin Scalia — another milestone in Trump’s rightward shift of the top U.S. judicial body.

If confirmed by the Senate to replace liberal icon Ruth Bader Ginsburg, who died at age 87 on Sept. 18, Barrett would become the fifth woman ever to serve on the court and would push its conservative majority to a commanding 6–3.

Like Trump’s two other appointees, Neil Gorsuch in 2017 and Brett Kavanaugh in 2018, Barrett is young enough that she could serve for decades in the lifetime job, leaving a lasting conservative imprint. Barrett is the youngest Supreme Court nominee since conservative Clarence Thomas was 43 in 1991.

Barrett, a devout Roman Catholic who earned her law degree and taught at the University of Notre Dame in Indiana, was appointed by Trump to the Chicago-based 7th U.S. Circuit Court of Appeals in 2017 and is a favourite of religious conservatives, a key Trump voter bloc.

With Trump’s fellow Republicans holding a 53–47 Senate majority, confirmation appears certain, though Democrats may try to make it as difficult as possible.

Democrats are urging U.S. Supreme Court nominee Amy Coney Barrett to recuse herself from any election-related cases because of Trump’s comments that he expects the justices to potentially decide the outcome, but there is no way to force her to do so.

Thematic Context: “Trump’s bid to quickly fill the U.S. Supreme Court vacancy left by Friday’s death of liberal Justice Ruth Bader Ginsburg could end the already remote chance of a pandemic relief package before the Nov. 3 election.

The vacancy is adding uncertainty in an already uncertain environment. But it may raise the odds of a Democratic sweep in the election, which could clear the way for a bigger stimulus package afterward to fight economic impacts of the coronavirus. — 22nd Sep 2020

CLASHES BETWEEN ARMENIA & AZERBAIJAN THREATEN SOUTH CAUCASUS STABILITY

Clashes erupted between Armenia and Azerbaijan on Sunday over the volatile Nagorno-Karabakh region, reigniting concern about instability in the South Caucasus, a corridor for pipelines transporting oil and gas to world markets.

Both sides, which fought a war in the 1990s, reported fatalities. Armenia and Nagorno-Karabakh, a breakaway region that is inside Azerbaijan but is run by ethnic Armenians, declared martial law and mobilised their male populations.

Armenia said Azerbaijan had carried out an air and artillery attack on Nagorno-Karabakh. Azerbaijan said it had responded to Armenian shelling and that it had seized control of up to seven villages, but Nagorno-Karabakh denied this.

The clashes prompted a flurry of diplomacy to prevent a new flare-up of a decades-old conflict between majority Christian Armenia and mainly Muslim Azerbaijan, with Russia calling for an immediate ceasefire and Pope Francis leading calls for talks.

Thematic Context: “After the UAE’s pivot towards the U.S. and Israel, this just became more sensitive. Iran has always been a political proxy chess piece for a U.S.-Russian standoff, the key thing to note now is that China has entered the fray and with an Iranian bias. The implications are not so much as to the sanction, but the geopolitical strain that will aggravate existing issues between the “three superpowers — U.S., Russian & China”. As a result, watchout for ratcheting of South China Sea tensions, faster push for Dual-Hegemonic Factions, issues over Gas Pipelines (Nordstream) and etc. The breakdown of world order and cooperation is beneficial for Gold & Silver.— 21st Aug 2020

WEEK AHEAD

A perfect storm of bad news has thrown global markets into disarray. America is running out of stimulus, fears of a constitutional crisis after the election are running rampant and Europe is wrestling with a second virus wave. Considering all this, the upcoming US employment report could be a pivotal event for the dollar and equities. In the political arena, Brexit talks will resume in Brussels while Trump and Biden will finally meet for their first debate.

However, for today, there is no significant data release scheduled. ECB President Lagarde is scheduled to speak today and there is a possibility of her talking about a possible shift to targeting average inflation in time to come.

SENTIMENT

FX

STOCK INDICES

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