I hope you’ve had a good week safely away from the virus. For those of you who are still working and supporting essential services during this period, please accept my gratitude that is shared with the millions of other people around the world. Whilst we each have our priorities in keeping fit and well, markets nonetheless continue to trade and present opportunities for focused investors. I intend to keep this post fairly brief today but wanted to share with you a couple of setups from our Checklist Report which we analysed in this week’s Trading Club video.
Although the number of globally confirmed cases for COVID-19 has reached nearly 1,000,000 people, and confirmed deaths approaching 50,000, it has been a relatively quiet week for the major equity indices. Following some astonishingly good gains last week, the upward momentum has faded and has seen the S&P 500 trade within a 200 point range since Monday.
Given that the VIX is still above 50, this may seem somewhat unusual to technical analysts. Yet when you look at the fundamentals represented by a neutral score of 0 in our Checklist, you can see what our better-informed community of Trading Club members was prepared with ahead of this week.
With sentiment remaining a key driver of markets in the short term, the ‘neutral’ fundamentals in equities may yet see price be driven to extremes in the coming month. This is highlighted by our Market Risk Checklist which presents a clear bias with a score of -2, suggesting that the consensus may be leaning towards selling risk assets.
Here you can see the failed rally which was faded by the consensus from ‘overbought’ levels this past week.
Away from the general direction of stocks and bonds, there have been some interesting setups appearing in currencies. The British Pound is one of those that I highlighted to Trading Club members in this week's video analysis. With a score of -4, the fundamental odds are clearly stacked against sterling.
GBP has also seen a massive appreciation from 1.15 to 1.25 in a matter of days and could be in the process of rolling over before the short-sellers arrive en masse and try to drive 'cable' lower.
Time will tell where the next setups appear, but rest assured that our Checklists and weekly Trading Club analysis will ensure that you are best prepared for the evolution in markets. With market drivers becoming increasingly complex in recent months it has never been more important to have a proven trading process at your disposal.
If you would like to join us for our full analysis including new insights each week or learn from the ground up with online tuition from Lex in our Million Dollar Traders online course, then seize our special offer and take your financial knowledge to the next level right away!
Have a safe weekend,
James Helliwell | Chief Investment Strategist