Back in January, Bay Street opened a new position in $TSLA at around $496 for its Lens of History fund. It had just made a new all-time high at the time. I didn’t like the price because I personally prefer to enter on a correction but making new all-time highs tends to be a rare exception to this rule. $TSLA went on to skyrocket to more all-time highs running all the way up to $968.99 in just 6 weeks.
Looking at the RSI, $TSLA was extremely overbought that entire 6-week run up. Then the coronavirus hit the United States and spooked U.S. equity markets sparking a selloff in everything. Not even $TSLA was not spared. But what is interesting is that while the correction in price was a very deep one, just past the 68.1% Fibonacci level, the correction in the RSI was not. Momentum never stayed bearish even in the midst of that vicious selloff in price.
Since finding a bottom at the support zone between $360.60-$384.25, price has rallied quite nicely signaling a move back to new highs. However, next week on the 29th, Tesla will be reporting first quarter earnings after the market close. We will be watching that report closely for future direction in price from here.
If you are interested in learning how I found these levels, please check out the CHARTS101 or CHART201 course. Read the charts for your Self so you can trade what you see and not what I think.
When oil markets crashed to $26.05 in 2015, it was the first time in my career that I had ever seen crude oil that low. It didn’t take long for prices to rally and put in what looked like a bottom. But when price didn’t retake the $100-handle 2 years later, I drew the Fibonacci retracement levels to see that the rally was actually only a correction! So I drew the Fibonacci extension levels to see where price could actually target if prices continued lower. I NEVER THOUGHT it would reach that 123% level at $5.78. NEVER. EVER. Today, we are in Never Never Land everybody wow.
So can oil prices really go negative? Because at this rate, $0 is not looking like support. And the next target is -$28.41. What a time to be alive.
Once in a lifetime chance to see what we are witnessing today.
[UPDATE, 4:24PM PST] Crude oil prices went negative hitting a low of -$40.32 and closed the trading day at -$37.63. UNBELIEVABLE!
If you are interested in learning how I found these levels, please check out the CHARTS101 or CHART201 course. Read the charts for your Self so you can trade what you see and not what I think.
With the entire world in full-blown pandemic, the Federal Reserve has gone above and beyond any other central bank in the world in response to COVID-19. To recap:
On March 3rd, the Fed surprised markets with an emergency interest rate cut of 50 basis points
On March 12th, the Fed restarted quantitative easing with QE5 injecting $1.5T into the repo markets
On March 15th, just 3 days later, the Fed slashed interest rates to 0% (effectively but 0-0.25% technically) and cut the discount rate by 50 more basis points
These aforementioned actions all occurred outside of the regularly scheduled FOMC meeting that was to be held on March 18th, which was cancelled
On March 23rd, a week later, opened up QE even more to include ETFs, corporate bonds and an first-time ever lending facility to retail banks for Main Street lending
But what happened to the USD while the Fed was enacting massive unprecedented monetary easing? It strengthened! It may seem incredulous that a currency would rally in the midst of such large injections of liquidity but forex traders can’t ignore the interconnectedness of global markets.
Each Fed easing event is circled on the chart
The real reason why the USD rallied in the face of massive monetary easing was due to the vicious selloff in U.S. equities that sparked a global demand for U.S. dollars. Looking at this $GBPUSD daily chart with the $SPX (orange line) overlaid, we can see that the surprise rate cut on March 3rd was met with the expected market response. Market participants sold the USD in the face of what was more aggressive easing action than expected (25bps cut), sooner than expected (at the scheduled March 18th meeting). But as the coronavirus ripped through Europe and reached America’s shores, investors become thoroughly spooked and began selling equities en masse. Therefore each subsequent Fed action only incited more fear thus making equities selloff harder and the USD rally all the more.
The only thing that finally comforted investors was the passage of the CARES Act, America’s multi-trillion dollar stimulus package. Since its passage, we have seen equity markets stabilize and find a (initial) bottom. And with that, the USD has finally got hip to the fact that the Fed has done what was previously unthinkable in America: 0% interest rates, trillions of dollars in liquidity, and the buying of corporate bonds and ETFs. Unbelievable.
The recent USD selloff has seen the $GBPUSD rally break the 61.8% Fibonacci level of cable’s recent descent. This signals a return to the 1.3212 resistance level. However, there a is significant resistance level that must be overcome at 1.2775. And we now are entering earnings season. I think the reaction in equities could be isolated to individual names but will still have an effect on USD demand. Watch for a correction lower in $GBPUSD but, ultimately, cable returns to the 1.3000 level.
Read more:
The Federal Reserve just pledged asset purchases with no limit to support markets (CNBC)
Traders Rev Up Bets on Who’s Next After Fed’s Emergency Cut (Bloomberg)
How the CARES Act Impacts your 401k (FaithmightFX)
If you are interested in learning how I found these levels, please check out CHARTS101 or CHART201 course. Read the charts for your Self so you can invest what you see and not what I think.
It’s been a week since the CARES Act became law. By then every stakeholder of business, from accountants to lawyers from investors to bankers, have held webinars and written blogs to how a company can take advantage of the covid19 stimulus package. While my initial thoughts were based in truth, I have learned a lot more strategy this week.
So I contend that my original thought still stands: African startups domiciled in the U.S. are eligible to get this money and they should.
The SBA Disaster Loan, also called the “Economic Injury Disaster Loan,” is a newly-streamlined version of the former disaster loan. It is an online application that has been radically simplified at https://covid19relief.sba.gov. It can be completed in about 20 minutes. An important feature of the SBA Disaster Loan is that it comes with a $10,000 cash advance grant, which can be sent to your bank account in three days. The loan itself is a 3.75% interest rate with long term repayment, or 2.75% for nonprofits. There are no fees or prepayment penalties, and the amount of the loan can be changed after submitting your application. This fund comes straight from the U.S. Treasury; we encourage impacted businesses, nonprofits and independent contractors to apply.
I encourage every founder to apply for the EIDL loan to receive the cash advance.
As for the other loan programs, it will highly depend on who is on your cap table as to whether or not you get disqualified from those programs. So if you’ve done a Series A or B round, there’s an affiliation clause that actually makes large VCs a disqualifier to the IRS. Talk to your lawyers and investors. You pay a good amount of money to maintain filings in multiple countries. You may as well let it work for you!
I shared links to my sources with my email readers, clients and founders, this week. If you want the links that informed my thoughts in this post, get on my email list!
On Friday, March 27, 2020, after debating and politicking for a week, Congress passed the Coronavirus Aid, Relief and Economic Security Act. The president signed it on Saturday. There are 2 sections dedicated to exemptions for individuals with an employer retirement plan or an individual retirement plan (IRA). From here on, the term, “retirement plan”, only refers to the aforementioned plan types.
The exemptions for funds held in a retirement plan are found in Sections 2202 & 2203 of the CARES Act. If you want the bullet point changes in plain English, SIGN UP above to join our email list. Our readers on the list already have them.
At first glance, there are 2 things great about this. Now, anyone has the ability essentially draw loans on their retirement. Before the bill, you could only draw a loan from a current employer’s retirement plan, leaving capital trapped for young people who have old retirement plans. Secondly, if done right, consolidating old retirement plans now allows you to pay off the distribution without cash out your pocket.
Just keep in mind that these “withdrawals” are actually penalty-free, interest-free LOANS. This money must be paid back. And, so far, without consequence. It is not explicitly stated what happens when this money is not paid back within the 3-year period. My guess is that you will pay the deferred early withdrawal penalty. But that’s only a guess. I’d watch for Congress to shore that up in a month from now when the Congress comes back from recess. Not sure why they are going on recess in the middle of a pandemic but that’s an entirely different conversation. Hopefully, they are using technology to do virtual town halls with constituents to find out how the next bill can be more impactful for the people and businesses that really need the financial help.
Consider these exemptions to access to your capital carefully. Since every situation is unique. If you’d like to speak with someone to plan this out accordingly for you, reach out to me and the team at Bay Street.
Read more:
Read the Senate’s full coronavirus aid package bill (NPR)
Pelosi Begins Drawing Up Next Stimulus With More Aid for States (Bloomberg)
On Friday, March 27, 2020, after debating and politicking for a week, Congress passed the Coronavirus Aid, Relief and Economic Security Act. The president signed it on Saturday. There are plenty of provisions in this bill designed to help small business owners, which includes startup founders.
As of today, 29 March 2020
If you are a founder of an African or Latin American startup that is domiciled in the US, you should also examine the new law to see how your company can be eligible for a grant or loan depending on how COVID-19 was impacted your business. You and your tax preparer or company accountant (or both) should look through the bill and discuss any advantages the company can qualify for. Then carefully assess whether it makes sense for your business. Remember to heavily consider your current and future cash flow so that you are able to service any debt in a timely fashion. Debt can be helpful to bridge expenses to the next fundraising round, the next big client or until your target market comes back online to full business and able to pay you again.
Your investors can help with advise here or as a sounding board. They may be able to connect you to professionals you need without incurring costs. Lean on them during this time. We really do want to be of help to you in any way. Reach out to your investors even if you haven’t heard from them. Remember, they are also adjusting to quarantine life regardless of where they may be based in the world. Show us some grace as you hope they show you.
Ultimately, this season will test us all to lead with compassion and creativity. Both founders and investors alike will be remembered for how they were treated during this time. Be kind and super helpful, with healthy boundaries. We get through this stronger than ever.
Source:
Read the Senate’s full coronavirus aid package bill (NPR)
Well, so much for the market correcting 20%. I guess it is all in the timeframe you are using to describe last week’s price action. The $SPX dropped last week, 7 trading days in a row to be exact, to correct over 50% off the all-time highs, measuring from the bottom of the December 2018 market crash. This is what the market looked like last week before the Friday close.
Maybe it bottoms in the Fibs, but I would’ve given this market to the pink zone.
This is what it looks like after, the new trading week is underway.
Two weeks ago, I was on the air with Dale and he asked me what I thought about the coronavirus. I told him that I thought the market would in fact turn lower and it would be a buy-the-dip opportunity. I also got too confident and laughingly said that I just caused the top. Well, this is where we were when Dale and I chatted.
Was it something I said? Of course not! It was just my luck that markets would finally react to the news of the coronavirus pandemic into Italy, Iran and the U.S. and the possible economic implications therein. As any technician would say (and I am not one), this is a healthy correction. The 50% Fibonacci level is a solid correction in any market. Now what would really frighten investors is if this bounce this week proves itself to be a dead cat bounce. That actually happened in that aforementioned December 2018 crash. To me, a move above 3200 in the $SPX really begins to signal that sellers have really cleared out of this market. Until then, we should remain cautious.
If you are interested in learning how I found these levels, please check out the course, CHARTS101. Read the charts for your Self so you can invest what you see and not what I think.
Last week, I was back on the air with Futures with Ben Lichtenstein. Since we are still in the new year season, it was a great segment that they produced as a trip around the world in currencies. Starting with the U.S. dollar, Ben and I talked about the fundamentals that are really driving currency flows in the market right now.
This morning, traders were greeted by news that the EU and UK trade talks are deteriorating. I actually mentioned this fundamental risk last week in my segment with Ben. Check out more of my thoughts on all the major currencies below. My accuracy coming to fruition this week is even amazing to me 🙂
I was happy to be back with Dale Pinkert at the ForexAnalytix Community Experience last Thursday morning. But super bummed that we got cut off due to technical difficulties. It was my fault (note to self: always charge up the computer before a show).
Amongst our forex talk, Dale and I also started talking about the coronavirus’s possible effects on the markets. As of last week, the markets had not really reacted to the news. However, I mentioned that I thought we would see a sell-off eventually induced by the coronavirus outbreak. So I welcome today’s price action. I don’t think it is a time to panic. It is a time to put orders in place and trigger your trading and investing plans.
The New Zealand dollar has been in perpetual downtrend for much of 2019. It didn’t start the new decade any differently as the kiwi has slid almost 300 pips agains the U.S. dollar and a whopping 1,000 pips against the Great British pound.
On the bigger timeframes, it is clear that the $GBPNZD is finding resistance at the big 123% Fibonacci extension level. The 2.05 resistance level is also not too far from that level giving some strong resistance confluence for bulls. This area continues to provide a headwind for bulls, even in this new week of trading.
A key driver of NZD weakness last year was the slashing of interest rates by the Reserve Bank of New Zealand (RBNZ). The RBNZ cut interest rates by 100 basis points last year with two 50 basis point cuts. That’s a lot. And those 2 interest rate cuts came within 3 months of each other. So the RBNZ really surprised markets last week. Though they kept interest rates on hold at 1%, they were more hawkish than expected in their monetary policy statement. Despite the coronavirus outbreak worrying central banks around the world right now, the RBNZ is more optimistic about employment and the economy than it had been in 2019 as inflation moves closer to the RBNZ’s target. The biggest influence to this change in outlook, however, has been new fiscal policy from the New Zealand government around infrastructure spending. The central bank expects this to boost consumer spending and GDP which is only good news for the NZD.
Despite the rosier fundamentals, the market has not taken much notice. Yet. The $GBPNZD remains rangebound between the 123% Fibonacci level at 2.0409 and the major 2.00 support level. The shift in fundamentals favors more downside moves in the $GBPNZD as the NZD should start to move higher. Look for rallies to continue to be met with sellers at the resistance level. Only a hold above the 2.05 level changes the downside bias in $GBPNZD.
