US equities led to the upside again yesterday with Nasdaq leading and Apple trading to yet another new high, but we continue to expect choppy price action in general as we run into quarter end and the expected rebalancing sell flows. As we discussed in our video of 23 June, we remain medium term risk bulls and are no longer at this moment focused on short term counter-trend plays but only on setups to express upside for the remainder of the summer and into the Autumn.

Some notable thoughts :

*In the US 30 US states now have an R > 1, but we note that hospitalisations and deaths are both falling, driven we believe by . However, the partial lockdown of a German region after a breakout at a slaughterhouse reminds us that we are still in the first wave of this virus, and we continue to be wary of a second wave in the Autumn, potentially timed for the US election. Dr Fauci reiterated that a vaccine is a matter of when, not if. Our view remains that continual vaccine updates will be needed, similar to an annual flu jab, to update against mutations and other coronaviruses. This will not be a “one and done” vaccine, but an ongoing project. We note that the political will for another lockdown is diminishing rapidally – note the new relaxations of rules in the UK designed to support the economy given the Health Service has capacity to treat.

*Re the election – the investor Marc Cuban made an interesting observation, when he said that Donald Trump wants to run a campaign, but Joe Biden wants to run a country. We should not underestimate the lengths the President will go to be re-elected, which is another of our secondary reasons for the prospect of a much bigger rally in US equities.

*Click here for.Aquila Notes 24Jun20

Filling the “gaps” in markets, created on the sharp move lower in March when USD funding issues became apparent (discussed in more detail in Video dated 23Jun). Finally CL2 filled the gap yesterday from March 9, but the candle is a “spinning top”, which does signal indecision for candle watchers. Further volume is declining as we come into a period that we are on alert to see some position liquidation. A technical led slip in oil we view as corrective and not trend ending; the 100dma at 34.70. The weekly charts have been immensely valuable over these past few months, and the constructive nature of many assets over that time frame is a key reason behind our underlying bullishness for risk technically. The 9week exponential moving average, which has been well respected on the rally intersects at 35.90, We view the 34.70/35.90 as very significant support for oil.

A key opportunity we have followed is short USDCAD – the break below 1.3850 we deemed significant, we felt USDCAD would pause in the overall risk pause of two weeks back, and traded up to initial resistance zone before consolidating in 1.3500/1.3650 zone. We remain USDCAD bears, and would view any pop higher as an opportunity to re engage with bearish side.

Second Oil future – daily chart

USDCAD – daily chart

Crude Oil 2nd Future – daily chart USDCAD – weekly chart

 

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