Traders Market Weekly: Robots, Dribbler Enthusiasm and Short Squeezes

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    Interesting on short squeezes are a boon in terms of market liquidity. Derivative trading plays a key role. Sellers of derivatives protection – after selling into market weakness to dynamically hedge their exposures – become aggressive buyers in a rallying marketplace.

    On the margin, speculative and derivatives trading are the marginal sources of marketplace liquidity. “Risk On” leveraged speculation creates liquidity and fuels looser conditions, while “Risk Off” destroys liquidity and tightens financial conditions.


    China getting Japan involved?

    August 5 – Wall Street Journal (Peter Landers and Chieko Tsuneoka): “China’s firing of missiles near Japan has left little doubt that Tokyo would be pulled into any potential war over Taiwan—and would be part of the U.S.-led alliance likely to defend the island. China’s military launched five missiles that landed inside Japan’s exclusive economic zone on Thursday, Tokyo’s Defense Ministry said… U.S. Secretary of State Antony Blinken, on a visit to Cambodia, cited those launches in calling China’s moves a ‘significant escalation,’ and he said the moves against Japan were ‘understandably causing them, and all of us, grave concern.’ The… inclusion of targets near Japan sent an unmistakable message, said Masahisa Sato, who heads the ruling Liberal Democratic Party’s foreign-affairs committee. ‘If you’re talking about surrounding Taiwan or imposing a blockade, of course in that case it means you’re bringing Japan into it as well,’ said Mr. Sato, a former army officer.”


    Equity indices in the Asia-Pacific region began the week on a mixed note.

    Japan’s Prime Minister Kishida indicated that he will reshuffle his cabinet this week.
    Hong Kong is easing coronavirus travel restrictions.
    Fitch warned that multiple sectors in China’s economy will be vulnerable if the distress persists in the property market.

    —Equity Markets—

    Japan’s Nikkei: +0.3%
    Hong Kong’s Hang Seng: -0.8%
    China’s Shanghai Composite: +0.3%
    India’s Sensex: +0.8%
    South Korea’s Kospi: +0.1%
    Australia’s ASX All Ordinaries: +0.1%


    China’s July trade surplus $101.26 bln (expected surplus of $90.00 bln; last surplus of $97.94 bln. July Imports 2.3% yr/yr (expected 3.7%; last 1.0%) and July Exports 18.0% yr/yr (expected 15.0%; last 17.9%)
    Japan’s June Current Account deficit JPY132 bln (expected deficit of JPY704 bln; last surplus of JPY128 bln). July Bank Lending 1.8% yr/yr (last 1.3%). July Economy Watchers Current Index 43.8 (expected 51.6; last 52.9)
    New Zealand’s Q3 Inflation Expectations 3.1% (last 3.3%)


    Major European indices trade higher in an otherwise quiet session.

    The eurozone’s Sentix Investor confidence survey for August improved slightly but it continues pointing to expectations for a recession in the eurozone.
    Moody’s affirmed Italy’s Baa3 rating but lowered the outlook to Negative from Stable.
    Fitch affirmed France’s AA rating with a Negative outlook.

    —Equity Markets—

    STOXX Europe 600: +1.0%
    Germany’s DAX: +0.9%
    U.K.’s FTSE 100: +0.7%
    France’s CAC 40: +1.1%
    Italy’s FTSE MIB: +0.7%
    Spain’s IBEX 35: +1.0%


    Eurozone’s August Sentix Investor Confidence -25.2 (expected -24.7; last -26.4)
    Swiss July Unemployment Rate 2.2%, as expected (last 2.2%)


    The S&P 500 futures are up 25 points and are trading 0.6% above fair value.
    The Nasdaq 100 futures are up 99 point and are 0.6% above fair value.
    The Dow Jones Industrial Average futures are up 163 points and are trading 0.7% above fair value.


    Palantir (PLTR 9.80, -1.65, -14.4%) (MNDY 149.07, +21.24, +16.6%)

    Big premarket moves after reporting quarterly results. The former trades down on worse-than-expected earnings and downside guidance. The latter is up on above-consensus quarterly results and upside guidance.


    Moving the Market

    — NVIDIA lowered Q2 guidance, attributed to a lower sell-in of Gaming products

    — Resilience to selling acting as its own catalyst

    — Senate passed the Inflation Reduction Act

    The PHLX Semiconductor Index is down 1.1% with most components exhibiting losses in solidarity with NVIDIA (NVDA 179.06, -10.83, -5.7%). Intel (INTC 35.80, +0.41, +1.2%) is moving against the grain with the largest gains among index components.


    U.S. Treasuries sit on their highs after adding to their opening gains.

    Treasuries followed their higher start with a sideways drift through the first hour of action, followed by a push to fresh highs that took place even as equities rallied out of the gate. The early buying has lifted the 30-yr bond back above its opening level from Friday while shorter tenors are nearing Friday’s starting levels

    Yield Check:
    2-yr: -5 bps to 3.18%
    3-yr: -6 bps to 3.13%
    5-yr: -6 bps to 2.91%
    10-yr: -7 bps to 2.77%
    30-yr: -6 bps to 3.00%


    WTI Crude: -0.9% to $88.22/bbl
    Gold: +0.4% to $1798.40/ozt
    Copper: -0.2% to $3.546/lb
    EUR/USD: +0.2% to 1.0201
    GBP/USD: +0.4% to 1.2119
    USD/CNH: UNCH at 6.7622
    USD/JPY: -0.1% to 134.79


    Ohhhh the humanity … CONGRESS passes lite version of “BUILD BACK BROKE”
    as they violate the best practices of not raising taxes + increased DEBT during the RECESSION
    However, we could be in “LITE” recession with strong job markets & minus 1% range
    $720 BILLION will be SWEET FEED to BULLS on WALL STREET in months ahead? but only if “all goes well”


    Beware of WOLVES in SHEEP’s CLOTHING 😉


    There does seem some money grabs in that bill … Since the market traded higher on the heels of these headlines, the rollover looks like buyer exhaustion and getting too complacent with its rebound.

    What I thought in the performance of the meme stocks and other heavily-shorted stocks, many of which have seen huge percentage moves on no news. Bed Bath & Beyond (BBBY 11.29, +3.13, +38.3%) is one such name, up 63% at its high today on no news. Volume in the stock is currently 95.1 million shares, about ten times its average daily volume.


    This doesn’t sound bullish: The Senate passed the Inflation Reduction Act, which features provisions for a 1% excise tax on stock buybacks and a minimum 15% tax rate on corporate book income (although there is an offset for depreciated assets)

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