Archives of “October 2020” month

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EURUSD trades to a 7-day high. Tests 50% retracement/swing area

  
Analysis, Forex

50% retracement 1.1764.  Swing area between 1.1767 and 1.17748

The EURUSD is trading at a new seven-day high brain going back to September 22).  The pair today based near a swing area at 1.1713-1.1718 and was able to extend above yesterday’s highs between 1.17508 and 1.1755.  The sellers are taking a break in this area. A move back below the 1.1750 level may give some buyers some cause for pause (and give sellers against resistance some comfort). However, the range for the day is only a modest 54 pips vs. a 77 pip average trading range for the last month or so. So there is room to roam, if the buyers can stay in control.
50% retracement 1.1764.  Swing area between 1.1767 and 1.17748_
The high has reached 1.1768 so far. That is above the 50% retracement of the move down from the September 10 high, and between swing areas between 1.17675 and 1.17748. Get above 1.1775, and it should open up the door for a move toward the 61.8% retracement at the nice round number of 1.1800.

UK September final manufacturing PMI 54.1 vs 54.3 prelim

  
Analysis, Economy

Latest data released by Markit – 1 October 2020

The preliminary report can be found here. Little change compared to the initial estimate, as factory activity expands for a fourth straight month but at a slower pace.

The good news is that output and new orders are still seen growing but the uncertainty surrounding the latest virus disruptions, stimulus measures ending, and Brexit could well weigh on the outlook moving forward. Markit notes that:

“September saw UK manufacturing continue its recovery from the steep COVID-19 induced downturn. Although rates of expansion in output and new orders lost some of the bounce experienced in August, they remained solid and above the survey’s long-run averages. Export demand is also picking up, as economies across the world restart operations and adjust to COVID-19 restrictions. Business sentiment remained positive as a result, with three-fifths of UK manufacturers forecasting a rise in output over the coming year.

“While the sector is still making positive strides, keep in mind that there remain considerable challenges ahead. This is especially true for the labour market, which saw further job losses and redundancies in September. The full economic cost incurred by 2020 will likely rise further as governments look to re-introduce some restrictions, job support schemes are tapered and rising numbers of firms start focussing on Brexit as a further cause of uncertainty and disruption during the remainder of the year.”

Eurozone September final manufacturing PMI 53.7 vs 53.7 prelim

  
Analysis, Economy

Latest data released by Markit – 1 October 2020

The preliminary report can be found here. No change to the initial estimate as this reaffirms a modest pickup in euro area factory activity last month, despite concerns surrounding the virus situation in the region.
That said, all this does is confirm a two-paced recovery towards the end of Q3 with the services sector expected to lag further amid the resurgence in virus cases – which we already saw with the preliminary reports (link above).
Markit notes that:

“The eurozone’s manufacturing recovery gained further momentum in September, rounding off the largest quarterly rise in production since the opening months of 2018. Order book growth and exports also accelerated, indicating a welcome strengthening of demand. Job losses consequently eased as firms grew more upbeat about prospects for the year ahead, with optimism returning to the highs seen before the trade war escalation in early 2018.

“The recovery would have been far more modest without Germany, however, where output has surged especially sharply to account for around half of the region’s overall expansion in September. Germany’s performance contrasted markedly with modest production growth in Spain, slowdowns in Italy and Austria, plus a particularly worrying return to contraction in Ireland. Excluding Germany, output growth would have weakened to the lowest since June.

“Divergent export performance explains much of the difference between national production trends, with Germany the stand-out leader in terms of growth in September, led by a strengthening of demand for investment goods such as plant and machinery.

“Encouragingly, optimism about the future rose not only in Germany but also in France, Italy, Spain and Austria, hinting that the upturn could broaden out in coming months. Without a more broad-based recovery, the sustainability of the upturn looks at risk, with additional worries fuelled by rising Covid19 infection rates.“

NICOLAS DARVAS AND HIS $2,000,000

  
  Analysis
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icolas Darvas viewed Wall Street as nothing more than a gambling casino; therefore, he set out to learn how to gamble.

I would like us to take a look at Mr. Darvas’ understanding of the stock market, as outlined in his best selling book How I Made $2,000,000 In The Stock Market, originally penned in 1960, as we recognize that what was true over 50 years ago still holds true today.  In other words, trading the market today is THE SAME AS IT EVER WAS.

Mr. Darvas experienced an “important turning point” in his stock market career when he learned that “there is no such thing as cannot in the market.  Any stock can do anything.”  With this in mind Darvas developed his “box theory” based on the following realizations:

1.  There is no sure thing in the market.  I was bound to be wrong half the time. Darvas adopted what he called the “quick-loss weapon”.  He already knew he would be wrong quite often (half the time); therefore, he decided to accept his mistakes realistically and get out of a losing trade with a small loss.  “This way, I figured, I would never sleep with a loss.  If any of my stocks went below the price I thought they should, I would not own them when I went to bed that night.  I knew that many times I would be stopped out for the sake of a point just to see my stock climb up immediately after.  But I realized that this was not so important as stopping the big losses.  Besides, I could always buy back the stock by paying a higher price.”

2.  My pride and my ego would have to be subdued.  Darvas surmised that with a win ratio of 50% his profits had to be bigger than his losses.  Breaking even was not a sustainable option.  For that to happen he would have to take many losses while letting the winners run.  Egotistical pride would have to give way to humble reality.  “As if stocks were made to conform to my new attitude, I handled this quite successfully for quite a while.  I bought with bold confidence when I thought I was right and coldly, without a hurt ego, I took my limited losses when I thought I was proven wrong.”

3.  I must become an impartial diagnostician. Instead of trying to force his will upon market direction, Darvas allowed the market to direct him by becoming intimate with a few stocks at a time and by not listening to others.  “To try to fit the market into a rigid pattern was a mistake.  As I only handled five to eight stocks at a time, I automatically separated them from the confusing, jungle-like movement of the hundreds of stocks surrounding them.  I was influenced by nothing but the price of my stocks.  I could not hear what people said, but I could see what they did.  It was like a poker game in which I could not hear the betting, but I could see all the cards.  Of course, the poker players would try to mislead me with words, and they would not show me their cards.  But if I did not listen to their words, and constantly watched their cards, I could guess what they were doing.”

(more…)

Japan Exchange says that hardware failed today, then switchover to backup system also failed

  
  Analysis

Adding that they are currently planning to replace the hardware to ensure regular trading on Friday

The exchange will also hold a news conference later today at 0730 GMT but I’m not sure what else needs to be said at this point. It will be more of a problem if this occurs more frequently from now on and if they can’t resolve the issue by tomorrow.

Moderna says its coronavirus vaccine will not be ready until 2021

  
  Analysis
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Moderna CEO Stéphane Bancel statements on Wednesday, carried in the Financial Times overnight ICYMI.

  • will not seek emergency authorization for Food and Drug Administration approval for its vaccine to use in frontline medical workers and at-risk individuals until Nov. 25 at the earliest.
  • company would not seek FDA approval for use in the general population until late January
  • If the vaccine is proven safe and effective, approval is unlikely to come until at least late March or early April
Link to FT, may be gated.

Bank of Japan Tankan report for Q3, large manufacturers sentiment -27 (-24 expected)

  
Analysis, Economy

BOJ quarterly report

  • big manufacturers index -27 (Reuters poll: -23, prior was -34)
  • big manufacturers index three months ahead seen at -17 (Reuters poll: -17)
  • big non-manufacturers index -12 (Reuters poll: -9, prior -17)
  • big non-manufacturers index three months ahead seen at -11 (Reuters poll: -9)
  • small manufacturers index -44 ( -38)
  • small manufacturers index three months ahead seen at -38 ( -34)
  • small non-manufacturers index -22 ( -21)
  • small non-manufacturers index three months ahead seen at -27 (: -21)

 

 

  • all firms employment index -6
  • big manufacturers’ production capacity index +15 vs June Q +15
  •  big manufacturers see fy2020/21 recurring profits -24.6 pct
  • big manufacturers see dollar averaging 107.34 yen for FY2020/21
  • big firms see fy2020/21 capex +1.4 pct (Reuters poll: +1.3)
  • small firms see fy2020/21 capex -16.1 pct ( -15.1)
  • September Q all firms financial condition index +5 vs June +3

 

This is painting a very poor picture. A couple of perhaps more encouraging signs are that the large manufacturing index has improved for the first time in … 11 quarters (nearly 3 years).

Non-manufacturing index improved for the first time in 5 quarters.

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The Bank of Japan Tankan reports on a survey of manufacturing and service companies designed to assess business conditions in Japan

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