Monday’s Bullseye: 28 September 2020

Here is our week ahead preview for the week commencing 28 September 2020....

It has been quite a risk-off week for the financial markets amid concerns over the recovery following an alarming rebound in coronavirus cases in Western Europe. Stocks sold off, the dollar rose, and gold and silver plunged.  At the time of writing on Friday, the pressure was easing a little as the major indices, the dollar and precious metals tested key technical levels. But there was not too much desire to take on excessive risk with the weekend fast approaching and coronavirus cases going exponentially higher in a number of Western European countries.

Looking Ahead

In the week ahead, monitoring the virus situation will remain top of the agenda. Fears that there will be stricter lockdown measures in the UK and elsewhere in Western Europe has dented confidence about the economic recovery. Yet the rising COVID cases has simultaneously increased the chances for more stimulus, which, if offered by governments, may offset some of the negative impact. Meanwhile, we will also have some key economic data releases to look forward to in the week ahead, including the US monthly nonfarm payrolls report and global manufacturing PMIs. Will the dollar continue to push higher, or will the downtrend resume? What about stocks and precious metals? Well, a lot will depend on the data. Positive news should bring about a positive response for risk assets, while disappointing numbers should have the opposite impact. As bond yields have remained depressed and the VIX fairly stable around 32, you get a feeling that sentiment could improve quickly towards the assets that took a beating this week, with some cheerful news or data to provide the trigger.  But there are just 27 trading days left until the US presidential election, so any potential gains could be limited.


Coronavirus cases in England have jumped by 60% in the past week, according to the Office for National Statistics. Across the UK, another 6,634 new coronavirus cases were reported on Thursday, which was the highest daily figure since mass testing began. As result, the reproduction number – or the R – has risen to between 1.2 and 1.5. Spain, France and several other European countries are in a similar situation. The situation could deteriorate over the weekend, which explains why the pound was near its lows as the time of writing.

But let’s not forget that at the peak of the pandemic, there was very limited testing capacity compared to now. Only those already hospitalized were being tested. So, the upsurge in the new confirmed virus cases, as alarming as they are, has to be taken with a pinch of salt. The most important point to remember is hospital cases and deaths have so far remained low but need to be monitored as there could be a lag. In Spain and France, where cases started rising sharply again well before the UK, these measures have thankfully remained low, offering some hope. What’s more, the battle against the virus has led to more breakthroughs on treatments, while scientists continue the race for producing a vaccine. Better treatment options mean deaths can hopefully remain low this time, reducing the need for growth-chocking widespread lockdowns.


As well as any unexpected improvement in macro data and potential slowdown in virus cases, one other possible source of support for the markets may come from Washington. According to reports, Democrats have started drafting a new $2.4 trillion stimulus bill, which could be voted on next week in the House. However, it will unlikely pass the Republican-controlled Senate. Growing pessimism that more stimulus will be approved is one of the reasons why stocks have fallen sharply in recent weeks. But if there is any unexpected optimism on this front, the gloomy mood in the markets may be lifted.

Will investors buy the dip in stocks and gold – again?

With the S&P and gold both off by around 10% from their respective record highs, there is a possibility we may see an unexpected rebound in the week ahead – simply because stock, gold and silver prices are relatively cheaper than a few weeks ago. Gold bulls would argue that not much has fundamentally changed to turn aggressively bearish yet. Various government stimulus measures are still ongoing, while more fiscal and monetary stimulus could potentially be on the way. Indeed, several officials from the Fed and other major central banks have suggested in the past week that more stimulus may be provided, if needed. Central bank balance sheets have been swelling, as QE programmes have been running at full throttle again. There’s thus ample liquidity which could find their way into the stock and gold markets after this latest dip.

However, the bears would argue that despite the mini correction, the disconnect between the economy and the markets is still huge, especially as the economic outlook has deteriorated because of the resurgent virus cases. In the US, the stimulus-driven recovery has slowed down which is not great with the presidential election looming large. 

With both camps having compelling cases, your best bet may be to wait for the markets to show you the direction. Currently, the trend for the S&P is bearish, within a much larger bullish structure. Thus, if the index breaks out of THIS falling wedge pattern in the week ahead, then lookout for potential upside:

S&P 500Source: ThinkMarkets and
However, in the event support around 3214 breaks decisively then there is nothing significant to hold the S&P until the 200-day average around 3108 or the 38.2% Fibonacci retracement around 3051.

Economic data highlights:
  • ECB President Lagarde testimony 
  • German retail sales  
  • US Conference Board (CB) Consumer Confidence 
  • Fed speakers including Williams, Harker, Clarida and Quarles 
  • Japanese industrial productionretail sales and housing starts 
  • Chinese official and Caixin Manufacturing PMIs 
  • Central bank speakers include ECB President Lagarde and FOMC members Kashkari and Bowman 
  • German unemployment, French consumer spending and Swiss KOF Economic Barometer  
  • US ADP Non-Farm Employment report, final Q2 GDP, Chicago PMI and pending home sales 
  • Canadian monthly GDP 
  • Manufacturing PMIs from Japan (Tanken), SpainItaly, Canada and US (ISM) 
  • Final Manufacturing PMIs from UK, France, Germany and Eurozone  
  • US data:  Core PCE Price Index, Personal Spending, unemployment Claims and ISM manufacturing PMI 
  • Australian retail sales,  
  • Spanish Unemployment Change 
  • US Non-Farm Employment report (NFP) 
  • US Unemployment Rate, Average Hourly Earnings, Factory Orders and University of Michigan Consumer Sentiment