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TRACKRECORD DAILY

Silver breaks higher

The ride is violent and will be a harrowing one. However, the fundamentals and technicals clearly point higher and it’s imperative to manage the risk prudently while continuing to ride the trend.

Assets all melted up in the Asia hours, with Silver and Nasdaq futures leading the charge. Nasdaq, however, stalled at the previous high registered last week and fell more than 2% during the New York trading session. Volatility is high, but risk assets will continue to do well and remain supported on dips.

The break higher in Silver is violent and the ride will be a harrowing one. However, the fundamentals and technicals clearly point higher and it’s imperative to manage the risk prudently while continuing to ride the trend.

WHAT HAPPENED YESTERDAY

As of New York Close 21 Jul 2020,

MARKET MOVEMENTS

  • USD weakened across the board and risk sentiment became strongly positive. EUR hit its strongest in 18 months on Tuesday after European Union leaders agreed on a landmark stimulus package to revive regional economies ravaged by the virus. The willingness to raise a 750 billion-euro ($857 billion) fund in capital markets on behalf of all 27 EU states was an unprecedented act of solidarity in almost seven decades of European integration. With the EU recovery plan sealed, investors will now focus on further U.S. stimulus after $3 trillion was injected earlier this year.
  • AUD played ball and exploded higher immediately after we said it was ready to follow the leaders (Gold, Silver, Tech stocks) in yesterday’s report. After dwelling in the doldrums of a tight range in recent days, an explosion of 1.8% is no mean feat for the AUD/USD. With the range now clearly broken, previous resistance at 0.7030 is now a strong support.
  • Tech was weak against the old school stocks as Amazon (1–8%) led the retracement after the 7% rally from the day before. S&P 500 increased just 0.2% on Tuesday, as selling in the last hour of trading spoiled a 0.8% intraday gain in the benchmark index. Relative weakness in the mega-cap stocks took the Nasdaq Composite down 0.8% after it set an intraday record at the open, while the Dow Jones Industrial Average (+0.6%) and Russell 2000 (+1.3%) outperformed. Regarding the late selling, there were reports that attributed it to Senate Majority Leader McConnell saying he doesn’t expect the next fiscal stimulus bill to be completed by the end of next week. Such reports are dubious, though, considering that the news was first mentioned in a tweet from a Politico reporter about 30 minutes prior to the selling.
  • Positive factors that helped broaden out the gains included another round of better-than-expected earnings reports and the EU agreeing to a €750 billion fiscal stimulus package. The market wasn’t up more, though, because of the off-day for the mega-cap stocks within the information technology (-1.1%), consumer discretionary (-0.4%), and communication services (-0.4%) sectors.
  • Precious metals (Gold, Silver & Platinum) had an all star showing, with Silver stealing the limelight +11.59% at 22.73 and another +1.22% in early Asian trading. The Silver bull market is about nigh, watch out above.

HEADLINES:

EU REACHES HISTORIC DEAL ON PANDEMIC RECOVERY AFTER FRACTIOUS SUMMIT

European Union leaders clinched an historic deal on a massive stimulus plan for their coronavirus-throttled economies in the early hours of Tuesday, after a fractious summit lasting almost five days.

The agreement paves the way for the European Commission, the EU’s executive, to raise billions of euros on capital markets on behalf of all 27 states, an unprecedented act of solidarity in almost seven decades of European integration.

French President Emmanuel Macron, who spearheaded a push for the deal with German Chancellor Angela Merkel, hailed it as truly historic. Leaders hope the 750 billion euro ($857.33 billion) recovery fund and its related 1.1 trillion euro 2021–2027 budget will help repair the continent’s deepest recession since World War Two after the coronavirus outbreak shut down economies.

Frictions peaked on Sunday night as Macron lost his temper with the frugals, diplomats said, and Polish Prime Minister Mateusz Morawiecki branded them “stingy, egotistic states”. The bickering dragged out the summit, making it the EU’s second longest ever, just 20 minutes short of a record set in 2000 in Nice, according to Rutte. “We would have broken the record at 6:05, but we ended at 5.45,” he said.

Under the compromise, the Commission will borrow 750 billion euros using its triple-A debt rating, disbursing 390 billion in grants — less than the originally targeted 500 billion — and 360 billion in cheap loans. The summit deal does not set the EU on the path towards a U.S.-style fiscal union, although some see it as a first step.

Thematic Context:” In the time after the 2008 GFC, no one took the European Union seriously because they were politically fragmented and it appeared that the only thing holding them together was the Common Currency.

That was until the Franco-German push for an unprecedented fiscal bill that broke ranks with the Maastricht Treaty that we took a second assessment, this is a big deal on EU terms as they are extremely fiscally conservative (scars left by WW2), for them to put their differences and history aside to push such a huge fiscal bill shows that when push comes to shove, there is still some motivation left in the union to make things happen.

Will this be a European Renaissance? ” — 23rd May 2020

COMMENTS/IMPACT: “This was their finest hour”, one of the greatest rallying cries of WW2 by Winston Churchill could be used to describe the historic feat pulled off by the Franco-German efforts. This may be the beginning of a renaissance in Europe and a watershed moment for the EUR. We believe a “Sputnik Moment” is nigh for the western world, especially when they need to rebuild a competitive economy to challenge the rise of China. European champions like Safran, Thales, Airbus and Volkswagen will be key to watch.

EUROPE’S GREEN REVOLUTION

European Union leaders clinched a deal on Tuesday for a huge stimulus package which the European Commission has said will make fighting climate change central to Europe’s economic recovery from the virus pandemic. Climate advocates said the final deal — a 1.074 trillion euro EU budget for 2021–27, plus a 750 billion euro recovery fund — was a mixed bag, with large sums earmarked for green investments, but cuts to key climate programmes and insufficient rules to ensure cash does not support polluting investments.

30% CLIMATE SPENDING SHARE

The deal earmarks 30% of the entire package for climate protection and says all spending must contribute to EU emissions-cutting goals.

JUST TRANSITION FUND

Countries that have not signed up to an EU-wide target to become “climate neutral” by 2050 will only get half of their share of the Just Transition Fund.

GREEN TAXES

New green taxes will help fill EU coffers, with an EU-wide tax on non-recycled plastic waste scheduled for next year.

Thematic Context: Green Initiative will be the narrative that underpins the need for unlimited fiscal spending to aid manufacturing and growth. The continent that is leading the charge in this theme is Europe. Europe has been the strongest advocate for carbon emissions, carbon tax, carbon credits (& Greta Thunberg).” — 20th May 2020

Greta is a conduit for which global leaders will use to rouse a downtrodden world into rebuilding for a brighter future. It’s a narrative that sticks and a narrative that makes unlimited fiscal spending justifiable (for the good of humanity), this will be an emerging and huge theme going forward. Assets that will benefit from this “Green Narrative” are Uranium, Platinum, Tesla and Uranium rich countries like Australia (AUD) and Canada (CAD).” — 17th July 2020

COMMENTS/IMPACT: Uranium related stocks and Platinum are breaking out higher. There isn’t much more to add, this is going to be a pivotal theme that lasts for years.

Reserve Bank Of Australia (RBA) QUELLS FEARS

Australia’s central bank saw no need to adjust its policy measures in the current environment, minutes of its July policy meeting showed on Tuesday, while board members reiterated that negative interest rates remained “extraordinarily unlikely”.

The Reserve Bank of Australia (RBA) had, on July 7, left the cash rate at 0.25% in a widely expected decision and said the “accommodative approach will be maintained as long as it is required”.

In addition, Australia will extend its wage subsidies (A$16.8 billion) for businesses hit by the coronavirus pandemic, as a surge in new infections in the country’s southeast threatens to keep the economy in recession.

The six-month extension of the programme allays fears of a hard end to the current A$70 billion scheme, originally scheduled for Sept 30, that would prolong Australia’s first recession in three decades. However, subsidies will be reduced under the new programme, which runs through to March 28, 2021 and is expected to cover about 1 million workers. The reduction was less than what markets feared it would be and sparked a 2% rise in the Australian stock index.

COMMENTS/IMPACT: RBA quelled fears that stimulus will be reduced. In a world of easy monetary policies, RBA erred on the side of hawkishness. The strong reiteration that negative rates are unlikely and maintenance of fiscal accommodation was all that was required to propel AUD higher. AUD broke the key 0.7000 level, with metals entering the start of a bull market, hard commodity currencies like the AUD will stand to benefit most.

DAY AHEAD

  1. Canadian Data
  • Canada will publish its retail sales data for the month of May before releasing inflation figures for June at the same time on Wednesday. Given its sharp tumble in the preceding month, the retail sales report could be the most important market mover among data releases for the CAD this week, which has just managed to stabilize from last month’s sell-off.

2. Currency markets are starting to show signs of life. AUD has broken out higher, the uptrend is resuming.

3. Silver and Gold continue to break higher. Keep the faith and hold on to your hats!

SENTIMENT

FX

STOCK INDICES

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Our market summary condenses the most important market events into a short read.

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