Amplify Weekly Strategy: 11th - 15th March 2019

Amplify Weekly Strategy: 11th - 15th March 2019


Monday: JN Machine Tool Orders, GE Trade Balance, Industrial Production, SP Retail Sales, UK Inflation Expectations, EU Eurogroup Meeting, US Retail Sales, Business Inventories, CB Employment Trends, BoE's Haskell speaks

Tuesday: AU NAB Business Survey, Home Loans, CN Foreign Direct Investment (tentative), FR Non-Farm Payrolls, UK GDP, Industrial/Manufacturing Production, Construction output, Trade Balance, BoE FPC Meeting Minutes, NIESR GDP Estimate, UK Meaningful Vote (tentative), US NFIB Small Business Optimism, EU Finance Minister Meeting, US CPI, Weekly API Inventories, RBA Debelle, Fed's Brainard speak

Wednesday: JN PPI, Core Machinery Orders, SP CPI, UK Pa Vote, Spring Statement, GE 30-yr Govt Bond Auction, IT 3/7/30-yr Govt Bond Auction, EU Industrial Production, US Durable Goods Orders, PPI, Construction Spending, Weekly DoE Inventories, 30-yr Govt Bond Auction, ECB's Mersch, Coeure speak

Thursday: CN Fixed Asset Investment, Retail Sales, Industrial Production, Unemployment Rate, GE/FR CPI, UK RICS House Price Balance, 30-yr Govt Bond Auction, US Weekly Jobless Claims, NAHB Housing Market Index, New Homes Sales, CA BoC Wilkins to speak

Friday: CN House Prices, JN BoJ Interest Rate Decision & Press Conference, IT Industrial New Orders, Sales, CPI, EU CPI, US NY Empire State Manufacturing Index, IEA Monthly Report, Industrial/Manufacturing PMI, JOLTs Job Openings, University of Michigan Sentiment, IEA Monthly Report, TIC Data, Baker Hughes Rig Count

Macro Overview - Sam North (@snorth19)

In summary of last week, the markets were very much Risk Off. Equities in the US all finished in the red for the first time since mid-December, whilst the Yen and the US 10-year enjoyed gains, the first positive week for the Japanese currency against the Dollar since late January.

Trade Talks on the backbench for now….

Last week saw the worst week of the year for US stocks, not helped by the considerably worse than expected jobs number on Friday. Talks of further Global Slowdown are rife and with a Dovish ECB and BoC on Wednesday and Thursday last week, focus will now shift to the important readings out of the States over the coming days.

To add further weight to the recent bearish sentiment, Boeing (the largest component of the Dow, ~11% of the index) is down heavily in pre-market trade (-10%) following the Ethiopian Airline crash on the Boeing 737 where there were unfortunately no survivors. At one point this morning, the Dow Jones was down over 200 points, so focus on the US Cash Open will be whether we see a further follow through.

At this moment, it is worth noting that Cash Open will be brought forward by an hour as the US have entered Daylight saving. With that in mind, the key data points to keep an eye on (Retail Sales and Inflation) will be at 12:30 rather than 13:30. The previous Retail Sales reading was the worst since September 2009 and whilst a negative recording is expected, a positive number will be needed to ease fears of the slowdown. Tuesday's Inflation numbers, again will bear a similar importance.

Trade talks have been put to the side for now - Expectations of an imminent deal has been now pushed back to April and despite the market feeling any good news has now been priced in, Donald Trump feels there will be a 'Very big spike in markets when trade deal is done'. Another factor adding to the sideline of Trade Talks, is that the President is seeking $8.6 Billion more in border wall funding due to be announced later today.

A Meaningful Week for Brexit

Monday may well be the calm before the storm. Theresa May, on Tuesday will put her deal back to Parliament in hope of undoing her historic defeat from mid-January. In reality, she most likely hasn't done enough to secure enough votes for it to pass and The Sunday Times have suggested she will lose by even more this time around which may prompt a renewed push for force her resignation.

Looking at potential options, it would be wise to only put a 5-10% chance of May pulling it out the bag. In the event of this, the Pound will push higher quite dramatically and from a trade point of view, will be the easiest to predict where the market will go.

Following that, an extension of Brexit will be most likely be tabled, voted through and accepted before being signed off at the March summit. Whilst this may be seen as positive for the GBP, there is still a potential Hail Mary Theresa may wish to pursue. She might go for a 'third time lucky' in looking to give lawmakers a final chance to back her deal once the Brexit delay is before them. By then, there may even be further EU concessions, but this is looking increasingly unlikely given that reports this weekend stated that the EU is contemplating an additional multi-billion fee on top of the agreed divorce settlement if an extension is granted, something that May would struggle to sell to the Brexiteer camp.

Other possibilities may be considering further amendments that might back a second referendum but that, at the moment, is unlikely to have enough backing. The Pound negative will really start kicking in to action should the probability of a no-deal start increasing. The likelihood is that this week will see a short extension but when we get to the next deadline, if there is no progress the Brexit hardliners will be hoping to force May to take the UK out of the bloc with no-deal. This, without doubt would lead to a move lower in markets if this looks likely.

A Technical Overview - Sam North (@snorth19)

S&P 500 Futures

As mentioned above, the US stock markets have endured their worst week of the year and with the plateau of trade talks, bad NFP and more global slowdown fears - the markets will be on edge. Technically, having broken through the 4th March low, this must be now considered as important resistance and if we continue to hold below, then a drift down to 2680 would be favoured if last week's low breaks. The key line in the sand for the bull/bears in my opinion is 2766 on the Futures.

GBPUSD Futures

Brexit will ultimately determine where this market ends the week but there are still some key levels to be aware of. 1.3100 will act as key short-term resistance, but any positive developments will see that break, so I would be careful about loading up shorts from there. To the downside, it is worth having a look at the potential trendline which is being formed from the January 3rd low. A negative week for Brexit sentiment could present the opportunity to get short below that.

Gold Futures

The break of the trendline you see offered such good chance to get short but following a decent move higher on Friday - Gold is starting to interesting again. The high of this week so far was the low from the 14th February so this will act as a bull/bear line in the sand along with the 1300 handle. If this market is to find resistance there and push lower, I would be keeping an eye on the lows of the 24th January as the next key support level.

WTI Crude Oil Futures

For this market, if I was not already in a position, I would be waiting for a break in either direction. A push above the all-important $58 handle would be key and if we close below $55 then I would like the look of a short back down to the low of 11th February. For now, the market seems range bound and waiting for further direction.

Sam NorthAssociate

Amplify’s Trades of the Week

Saif Ali @saifali1100 – Using the recent breakthrough of early February support as a resistance point now to get short Gold.

Tommaso Iaquone @tommasoiaquone – Short Oi on a break of last week’s lows should we get down there again.

Charlie Hyett @CO_Hyett – Using the previous resistance points to get long should we get a pullback for Copper

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