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Stocks surge in erratic trading

Brent Crude oil – Daily Candlesticks
Source: GKFX / MT4 (October 8th, 2020)

Brent crude oil has formed a lower low in price but the RSI indicator is showing a higher low- indicating a bullish divergence signal.
 

TAKEAWAYS


•    Dow Jones jumps 500 points, erases Monday drop
•    President Trump agrees to airline specific stimulus
•    Dollar dips after dovish FOMC minutes
•    Pound wobbles as UK reiterates will quit talks after October 15
•    DAY AHEAD: ECB minutes, US jobless claims
 

GURU WISDOM


“If you buy things you do not need, soon you will have to sell things you need.” - Warren Buffet
 

MARKETS


There was a lot going on as far as tweets from President Trump as well as the release of minutes from the latest Fed meeting. None of it really explains the surge in US stock prices that saw the Dow Jones have its best day since July. The gains follow sweeping losses on Monday after President Donald Trump ended stimulus talks. The best explanation is a general rise in uncertainty, which tends to cause volatility.

European markets were sluggish in reaction to the end of stimulus talks while stocks in Asia pushed higher, helped by increasing likelihood of Trump leaving the White House, likely ending hostile trade policies in the region.

The Federal Reserve released minutes from its last meeting, which did little to surprise traders but did reiterate a unified view by Fed members that interest rates should be kept near zero for at least two to three years. That view hurt the dollar as riskier currencies gained alongside stock markets and bond yields.

The British pound turned lower on the headline ‘UK plans to quit Brexit trade talks if no deal seen by Oct.15’ but quickly retraced the losses.

The price of oil dropped for a second day after EIA crude inventories saw a bigger than expected build, following a similar result in API inventories on Tuesday. The threat of oversupply left oil unable to participate in the risk-on rally. Gold prices moved higher alongside stock markets but barely recovered half of Monday’s losses.
 

Latest on stimulus


Concern that there would be no immediate large scale stimuls deal from Monday gave way to hope that ‘mini deals’ could still be done sooner. Trump signalled he would agree to a smaller bill directed at airlines, something House speaker Nancy Pelosi also supports. Airline stocks were among the biggest gainers.

Trump also tweeted he would support stimuls that included only direct checks to Americans. While most analsyts are skeptical these mini deals can be completed, there is a rising belief that whoever wins on November 3rd, a stimuls bill would be first priority. 
 

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