26th Oct Market Analysis – Traders Get Ready For A Busy Week.
26th Oct Market Analysis – Traders Get Ready For A Busy Week.
Author: Justin Freeman
A Review of Upcoming News Events and How to Trade Them
With markets poised for a break out of some sort, getting an understanding of the week’s news schedule is crucial.
The past week saw more range-bound trading. The financial and political calendars are both indicating the coming week could be very different with volatility and trading opportunities likely to pick up in number.
Gold’s weekly opening and closing prices were $1899 and $1902. A $3 difference over a trading week in the world’s safe-haven asset, confirmed markets lacked much conviction.
In terms of gold itself, the gravestone doji will be putting off some gold-bugs. The Weekly 20 SMA ($1894) has provided significant support and with the price hovering at that level there could be trade ‘breakout trade’ entry points forming for both bulls and bears.
The long-term technicals still look positive for the price of gold. Trading above the 20, 50 and 100 SMA the price has a lot of support, but if price does need to consolidate it could be a test of nerve for those with long positions. The Monthly 20 SMA is currently at $1593 and if price were to head to that level before pushing on up it would form a 16% correction.
The weekly calendar points to a range of events which could bring price volatility into the markets.
Corporate earnings– More than one-third of S&P members are announcing Q3 results this week
US Presidential election – days, not weeks until the counting starts
Brexit talks – due to resume in London
China five-year plan. A renewal or expansion of protectionist policies would be a slow-burn reminder that the US-China trade war has not been resolved.
Is the Market Ready to Break out?
The item which is likely to grab the headlines is the closing stretch of the US presidential campaign. It might be premature, but the US election has already been called as a Biden victory in some parts. The thinking is that as many as one-third of potential voters have already cast their vote using ‘mail-in’ schemes.
Given that votes cast already would reflect Biden’s lead in the polls over the last weeks; that leaves the incumbent president with a smaller demographic to win over to his side. If the pollsters are wrong again, the fall out will be significant.
At least the election date (3rd November) is known. The Brexit talks, the stimulus bill and China’s 5-year plan announcement are likely to spring surprises throughout the week.
The only other certainty is the dates of the Corporate Earnings releases. Using the below as signposts through the next five days might be a welcome relief when the political timebombs can go off at any time.
Tuesday – Microsoft (Nasdaq: MSFT) One of the best performing large-cap stocks of 2020. The stock price is currently up 37% on a year-to-date basis. Price has been trading sideways for several months and is now back in line with where it was in May.
Thursday – Four companies, representing more than 15% of the S&P 500’s total weight are due to report on the same day.
Even without the intervention of coronavirus infection data, investors can expect considerably more volatility in the coming days. A lot of the news events are unscheduled, so paying attention to the events that are could be the way to find trading opportunities.
Our analysis is based on a comprehensive summary of market data. We use a range of metrics with weighting given to simple and exponential moving averages and key technical indicators.
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Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds.
He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.
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