Masks, FED and Charts

Most the focus in the media, from analysts and pundits is on the developing Coronavirus situation in China and the rest of the world. Our thoughts go out to those who have been touched by the disease. The challenge for the market is what kind of affect will this have on growth expectations and in turn on investment returns ranging from which sectors will get hit the hardest, bouts of risk on and risk off in addition to traders have to decide what to focus on.

In Singapore as well as Stockholm, masks are sold out. Probably an issue in other areas as well.

Hong Kong has started closing some of the border crossings with China and we think there will be more to come.

WHO, says China has things under control, look for more delays to school and travel in China.

Tomorrow the Fed in the U.S. will hold a press conference after their two day meeting.  The market will be interested to see if the events in China and the Middle East will factor in their conclusion. We may well see a more dovish Fed which will give some support to equities and other risk assets while hurting the USD.

We would expect gold to benefit should the Fed signal a possible cut in the months to come.

In addition to the Fed tomorrow, we have several economic releases that will come out today and tomorrow.

13:30 U.S. durable goods orders

15:00 U.S. Consumer confidence

15:00 Richmond Fed Manufacturing

Apple results after the close

On Thursday and Friday we will get:

Australia Q4 GDP

US GDP Q4 estimate

China Jan PMI, Euro Zone Q4 GDP, Canada GDP, US Dec PCE inflation

The above will give us a sense of the status of the economy as it was at the end of 2019. 

The charts we are watching:

Gold having failed up at the $1,600 level is retracing and currently trading at $1,573. The market seems to have calmed down and looks to test the new longs by retracing down to the $1,560/$1,565 level. More bad news on Coronavirus or a dovish Fed may give it a boost back to the highs tomorrow.

The High Yield market in the U.S. is showing signs of worry. A break of the 86.50 level on HYG will open for lower levels and most likely will coincide with lower global equity prices.

Many of the global equity indexes were testing key support yesterday. The DAX Index having broken the 13,300 level needs to hold above the 13,000 trendline support or risk a test lower.

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TickerDate OpenedEntry PriceStopTarget PriceCurrent Price% Change
Long EURCHF Put Option, Strike 1.0650, Expiry 15.4.20202020/01/151.0757 (0.00620)1.06905 (0.00622)+0.32%

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2018: 45 Trades, Hit Ratio 53,66%, Profit +35,87 %
2019:   31 Trades, Hit Ratio 45,16%, Profit +26,97%

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