Trump is back.
He’s feeling strong, he’s feeling fit, and as he’s said, he’s feeling better than he “has in 20 years”.
COVID couldn’t keep the US President off Twitter for more than 24 hours, and upon his triumphant return to the White House yesterday, he has proceeded to drop some doozies.
Aside from the usual Twitter-storms of bite-sized Election campaign slogans, there has been a particular policy related stand-out that has proceeded to smash markets into the US close.
Trump Tweeted; Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request, and looking to the future of our Country.
I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.
I have asked Mitch McConnell not to delay, but to instead focus full time on approving my outstanding nominee to the United States Supreme Court, Amy Coney Barrett. Our Economy is doing very well. The Stock Market is at record levels, JOBS and unemployment also coming back in record numbers.
We are leading the World in Economic Recovery, and THE BEST IS YET TO COME
So, the only thing propping up the already fragile markets has now been removed. Results below.
Markets have been relying on continued stimulus into the election, allowing US households to continue to spend and survive until the economy opens back up.
Copper, iron ore and other ‘economic bell-weather’ materials have all trended strongly higher in recent months, thanks to promises of continued stimulus and global growth.
This is now an uncertain thesis.
It seems that Trump has had enough of Nancy Pelosi’s shenanigans, and with his new-found health, fitness and vigor, is willing to take a leaf from his best-selling tome, “The Art of The Deal” and “know when to walk away from the table”.
Given the Trump is significantly ‘invested’ in the continued advance of the stock market ahead of the election, which he oft touts as a bell-weather for his administration’s good work, the market’s behaviour in coming days will be very interesting indeed.
The violence of the sell-off is to be expected, and as is the case with many of these ‘Trump-tweet-driven’ events, the level of uncertainty drives all asset-classes generally lower.
The ‘safe haven’ of Gold is often cause in the melee during rapid-fire sell offs, as traders and investors liquidate positions and go to cash, or receive margin calls to address the movements that models have not accounted for.
This event is no different.
Gold has sold off almost 2.5%, and having already consolidated lower after an almost parabolic run to $2100, with the all important ‘stimulus juice’ having just been snatched away, lower prices seem likely.
A closer look at Gold on a 1Hour Timeframe showed price struggling to clear previous high around USD1917 before the tweet-storm.
Readers can see clear rejection of the upper levels, and previous highs, with are marked by the Icarus Auto Support and Resistance Indicator at USD1913, with price accelerating lower after the Icarus Oscillator identified a change in trend lower.
Drilling down further into Gold on the 15min chart showed a range of confluence factors suggesting price was headed lower. The Icarus Reversals lower band was breached WHILE crossing through an Icarus Support Level, AND the Icarus Oscillator had turned negative.
The two key asset classes of US equities and Gold selling off concurrently does not bode well.
Thankfully, previous sell-offs such as these have resulted in the ‘Buy The Dip’ crowd rapidly reentering the market and finding new highs. Although, with the much anticipated stimulus now off the table, and Trump in a renewed position of strength, US politics is likely to drive markets for coming days and weeks.
As usual, the team at Zerohedge.com have a full and complete snapshot of all major markets following the President’s latest posturing. Intriguingly, they also provide a little air-time to the ubiquitous and increasingly accurate, Dave Portnoy, who avid readers will recall met with President Trump for a one-on-one meeting at the White House.
Chart of the Day
The United States Presidential Election As of October 4, 2020