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The Week That Was - What Lies Ahead?

Editorial

This week saw the carnage between short-selling hedge funds versus traders and Wall Street Bets (WSB) go to another level with long investors in both the high fliers and SPX stocks suffer losses after the extraordinary intervention by Robinhood and others stopping clients buy stocks that these hedge funds were short of 2 days before crucial option expirations. Robin Hood has given differing excuses, we know new Treasury Secretary was paid over $800k by Citadel last year and we know The White House Press Secretary's brother is a portfolio manager at Citadel. We then have the recurring bad actor Stephen Cohen in the mix. Many variations of theories abound.

What we do know is the short GME hedge funds suffered a mark-to-market loss of $19.75 billion year to date in GameStop, according to data from S3 Partners. We have the broker, Whitehouse, banker intervention (pick your blend). Short sellers mostly are holding onto their bearish positions or they are being replaced by new hedge funds willing to bet against the stock. GameStop shares that have been borrowed and sold short have declined only about 5 million over the last week, an 8% dip in the short interest, according to S3. Most of the short covering occurred on Thursday, when the stock fell for the first time in six days due to Robin Hood action. Some of the moves For the week: GameStop gained over400%, AMC Entertainment rose 278%, Express 235%, Siebert Financial 122%, Cel-Sci 75%, Novavax 74%, Vaxart 68%, Fulgent Genetics 60%, Vir Biotechnology 59%, National Beverage 54%, and Fossil 47%. The VIX Index spiked to over 37.

Raising your eyes and looking at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry. The  runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended?  The mania is live and well in the stockmarket, the story of the climaxing Game Stock story, some maybe good, as the power of the elite and the bankers is being tested if not wrecked by the herd of small investors or so called Robn Hood traders. Though on the other hand the stockmarket has lost rationality  the danger is should the bubble pop the consequences of a historic debt crisis in deeply devided social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.

Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. 

The jobless claims follows December showing the first a fall in jobs since April. The ECB held its first meeting of 2021 with policymakers sticking ex with extra stimulus from December, but the economic outlook continues to be clouded with the discovery of new Covid-19 strains and the relatively slow pace of the vaccination rollout. The Bank of Japan and Bank of Canada also announced predictable policy settings. Following the first major S&P 500 companies to post earnings for Q4 2020 are money center banks JP Morgan, PNC, Citigroup and Wells Fargo last week we kicked off week 2 with Goldman Sachs, Bank of America and Netflix earnings and finished Friday with Schlumberger earnings

Contents

  • Stockmarkets
  • Energy - Oil and Gas
  • Foreign Exchange
  • Gold and Silver
  • Fixed Interest & Banks
  • Risk Radar
  • Geopolitcs and Economy
  • Week ahead

 

Stock Markets

Highlights - USA

  • The S&P500 dropped 3.3% (down 1.1% y-t-d),
  • Dow fell 3.3% (down 2.0%).
  • The Utilities declined 1.3% (down 0.6%).
  • The Banks sank 5.8% (down 0.1%), 
  • Broker/Dealers fell 4.0% (unchanged). Transports sank 6.0% (down 3.3%).
  • The S&P 400 Midcaps fell 5.0% (up 1.5%), and the small cap Russell 2000 dropped 4.4% (up 5.0%).
  • The Nasdaq100 lost 3.3% (up 0.3%).
  • The Semiconductors sank 6.1% (up 3.3%). The Biotechs fell 2.9% (up 4.3%).
  • With bullion slipping $8, the HUI gold index fell 1.8% (down 5.3%).

US Indices W 1 29 2021 

Highlights - Europe

  • France's CAC40 fell 2.9% (down 2.7%).
  • German DAX equities index slumped 3.2% (down 2.1%).
  • Spain's IBEX 35 equities index sank 3.5% (down 3.9%).
  • Italy's FTSE MIB index fell 2.3% (down 3.0%).

 

In Europe - how we closed January 2021

For the month France's CAC40 fell -2.9% now down 2.7% for the year after falling 7.1% in 2020

CAC 1 31 2021

The German DAX equities index slumped 3.2% this week (down 2.1% for the month and year)

DAX 1 30 2021

In January U.K.'s FTSE100 index dropped another 2.9% (down 2.7% y-t-d after falling 14.3% in 2020

FTSE 100 31 1 21

Italy's FTSEMIB index fell 3.0% in January after it fell 5.4% to 22,233 in 2020

FTSE MIB 31 1 2021

Spain's IBEX35 equities index continued to fall in January another 3.9% (and YTD) after falling 15.5% for 2020.

Spain IBEX 31 1 2021

Highlights - Asia

  • Japan's Nikkei Equities Index sank 3.4% (up 0.8% y-t-d).
  • South Korea's Kospi index sank 5.2% (up 3.6%).
  • China's Shanghai Exchange fell 3.4% (up 0.3%).

 

Japan's Nikkei Equities Index and China's Shanghai Exchange January 2021 Closes

Japan's Nikkei Equities Index fell this past week 3.4% leaving it up just 0.8% y-t-d after rising 16% higher in 2020 at hitting 30 year highs in January.

Nikkei 2020

China's Shanghai Exchange fell 3.4% for the week to be up 0.3% for January. Jitters after #China’s overnight rate had soared to its highest since 2015.

Shanghai Composite 2020

Australia - ASX 200 Close for January 2021

  • The Australian sharemarket had its worst weekly performance since late October this week but saw a 4th consecutive month of gains #ASX 200 Index closed -2.8 % for the week at 6607.4, +0.3% for January
  • Best Zip +37.4%
  • Worst Polynovo -32.2%

 ASX 31 1 2021

Highlights - Emerging Markets

  • EM equities were under pressure.
  • Brazil's Bovespa index declined 2.0% (down 3.3%), Mexico's Bolsa lost 3.8% (down 2.5%).
  • South Korea's Kospi index sank 5.2% (up 3.6%). India's Sensex equities index dropped 5.3% (down 3.1%). China's Shanghai Exchange fell 3.4% (up 0.3%).
  • Turkey's Borsa Istanbul National 100 index lost 4.5% (down 0.2%).
  • Russia's MICEX equities index stumbled 3.1% (down 0.4%).

IPO mania was back in full force with Snowflake an indication of, which more than doubled on debut.

From rebalance as a natural reversion after the bull mania we have surged with another speculative rush. This after Dow ended the second quarter with a 17.8% gain, the biggest quarterly rally since the first quarter of 1987, when it ripped up 21.6%. IS that enough to rebalnce and go higher? The S&P 500 had its biggest one-quarter surge since the fourth quarter of 1998,  soaring nearly 20%. The Nasdaq Composite jumped 30.6% for the quarter, its best quarterly performance since 1999.

Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.

Biggest SPX Stock Winners and Losers Last Week

 SPX Top Stocks 1 29 2021

S&P 500 Index Technical Analysis via @KnovaWave

After SPX rallied to new all time highs, closed the week testing tenkan san & +4/8 Murrey Math Daily & Chikou break retest. We have a number of alternatives of degree (iii) or (iv) of 5, Keep it simple support is Tenkan and Kijun as Chikou rebalances.

The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages.  Note the 100% extension from the emotive element and MM levels when the spit kicks in.

SPX D 1 29 2021 

Weekly SPX spat the break channel it had been tracing since the break of v of (III) or (V). Key is spit or retest of MM 8/8.. Major support is previous highs and Tenkan. We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.  Keep an eye on the putcall ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as chickou rebalances

SPX W 1 29 2021 

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.

Semiconductors SMH

Watching Semiconductors cleanly with Murrey Math levels and Tenkan - keys are previous high at +1/8 and Chikou rebalance patterning. Weekly +2/8 around 250 key number recognition factor also.

SMH W 1 31 2021

Apple $AAPL

 AAPL W 1 29 2021

Amazon $AMZN

Amazon high was MM +3/8 and from there has built a large weekly flag which it closed under after breaking the Tenkan and Kijun, watch if Kijun closes through Tehkan for a bigger move.

AMZN W 1 29 2021 

Energy and Commodities

Highights

  • The Bloomberg Commodities Index rallied 1.2% (up 2.6% y-t-d).
  • WTI crude dipped seven cents to $52.20 (up 8%).
  • Gasoline added 0.3% (up 10%)
  • Natural Gas jumped 4.8% (up 1%).
  • Copper fell 1.9% (up 1%).
  • Wheat jumped 4.5% (up 4%).
  • Corn surged 9.3% (up 13%).
  • Bitcoin rallied $1,319 or 4.0%, this week to $34,641 (up 19.2%).
  • Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
  • U.S. producers production still under pre Laura levels.
  • Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.

BDI Freight Index

 BDI W 1 29 2021

Copper

Copper has been a leader in the risk on movement, The weekly channel since the low has maintained the speed of the move with support at the tenkan.

 Copper W 1 29 2021

US Crude Oil (WTI)

In any break key is crowd behavior to help tell the story. We watch ABC corrections from here. he March breakdown, Support Tenkan and Kijun. In any break key is crowd behavior to help tell the story. We watch ABC corrections from here.

WTI D 1 29 2021

WTI after it's huge run continues to rebalance chikou indicative of extreme crowd behavior in a series of fractals. We have completed 5 waves as marked, from here we watch 3 develop to confirm.

 These are special times, recall "After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications." Support is previous channels, tenkan and Kijun. Above we have 50wma and Murrey Math time and price Above we have 50wma and Murrey Math time and price.

 WTI D 1 29 2021

US Natural Gas (Henry Hub)

US Natural Gas continues to work the lows that were either (5) or (iii) of (5). After a b or ii down we have bounced over tenkan and Kijun into cloud. Key is that 3 wave low. Above top of cloud. So far consistent failed breaks despite the strength of spitting the previous low and -2/8 with an island reversal to test the Kijun and downtrend line but fell back to Tenkan The big question is was that a completed move down there or a 3? Support at cloud.

 NG D 1 29 2021

Natty continues in large sideways pattern between weekly kijun and tenkan as they suppress. Above Cloud and 50wma. Support is downward channel and previous low. Talking fractals, remember the tenkan/kijun kiss of death brought it down from the $2 range. Much work here churning away. .

 NG W 1 29 2021

Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold slipped 0.4% to $1,848 (down 2.7%).
  • Silver surged 5.3% to $26.914 (up 1.9%).

Gold

Gold exudes strength after it back tested the previous wave 3 after finally cracked the Tenkan after correcting in 3 waves from 1556 to Murrey Math +3/8. In sight of the intraday high of $1765.43 reached on May 18. We have overcome the negative divergence between the weekly chikou, Silver spread and the recent highs. Support Tenkan & Kijun. From there does the 5 play out? Watch Fibs and chikou.

 Gold W 1 29 2021

Silver

Silver squueze is front and center with WSB after GME. Knowing that recall Silver did a fractal of the sharp C up to breakdown level above the cloud fed by divergence from gold reverting. Silver sits just under a huge Weekly flag and as we know reacts with much more violent impulse than gold . Given that we have to repsect this is a 3  - key is the recent V of what degree this is. Note the MM levels.

Silver W 1 29 2021

 

Forex Markets

Highlights

  • For the week,the the U.S. dollar index increased 0.4% to 90.584 (up 0.7% y-t-d).
  • Majors for the week. For the week on the upside, the British pound increased 0.2%. On the downside, Australian dollar 0.9%, the Japanese yen 0.9%, the Swiss franc 0.8%, the Canadian dollar 0.3%, the euro 0.3%
  • Minors for the week  For the week on the upside, New Zealand dollar rose 0.1%. On the downside, the Mexican peso declined 2.9%, the South Korean won 1.4%, the Norwegian krone 0.8%, the Swedish krona 0.8%, and the South African rand 0.1%. The Chinese renminbi increased 0.81% versus the dollar this week (up 1.52% y-t-d).

Australian Dollar - AUDUSD

Aussie dollar continues higher after it completed 5 waves in emotive fashion. with vigor spitting the 100% panic muster. It has closed over the 50 Wma in 5 waves The AUDUSD pulled up close to 0.7806 on Thursday just shy of the three year high of 0.7820 from January 6. Support Tenkan and Kijun.

AUD D 1 29 2021

New Zealand Dollar - NZDUSD

The Kiwi mirrored the AUD and has closed over the panic breakdown (0%) correcting all of the panic muster wave and running to the 38% Fib & 6/8 confluence.  Support the Tenkan, which is pivotal. Resistance 6/8 spits.

NZD W 1 29 2021

Canadian Dollar - USDCAD

The Loonie continues to correct in ABC after spitting the 261% Fib & Weekly 8/8 after 5 waves lower. We closed at the old 100% 61.8% confluence. Use Fib s for support and resisitance until Tenkan and Kijun catch up, 

CAD W 1 29 2021
Euro - EURUSD

The Euro tested and broke both the channel after ABC (IV) then retested the tenkan to spit the +1/8 in 5 waves from there we closed the week back testing the tenkan (orange). A question of degree on recent high - 1 complete or 1 of 3?, Watch 3 waves to see development for continuation. Resistance is Fibs as marked.  Watch for impulse off Chikou rebalance and Kijun above. Again governed by EURGBP and Bund volatility. 

EUR W 1 29 2021

British Pound - USDGBP

GBP W 1 29 2021 

EuroPound - EURGBP

Back testing top of outer band and tenkan of Brexit. Johnson price reaction.after its classic ABC out of failure following the X wave. Tenkan will give us a clue if normalcy is returning to the channel trade.

 EURGBP W 1 29 2021

Japanese Yen - USDJPY

Japanese Yen still stuck in channel trade, a series of failures and sharp bounces after X led 3 wave panic. Any change will come from the weekly Kijun Tenkan kiss. Use your #USDJPY Murrey 6/8 0/8 grid for now. #EURJPY #AUDJPY will determine risk on/off

JPY W 1 29 2021

 Mexican Peso USDMXN

The Peso has been correcting in ABC since it collapsed and spat 261% right back to the 100% Fib  We have seen violent moves with outisde uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise. 

MXN W 1 29 2021


Turkish Lire USDTRY

Turkish markets reacted to another two percent hike in interest rates to 17% boosted sentiment towards the Lira. The USD/TRY has fallen to 3.3800 and is set to test its 200-day moving average at 7.3100 assuming the US Dollar remains weak. Keep an eye on geopolitical risk factors. 

 TRY W 1 29 2021

Bitcoin

Bitcoin has exploded after it spent a year consolidating under the 61.8% spit. Each tenkan and kijun tap has seen an explosive kiss of life. Use Murrey Math levels for higher corrections and target as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.

 BTC W 1 29 2021

Bond Markets (and Fed Watch)

Highlights - Treasuries

 TNX W 1 29 2021

Investment-grade bond funds saw inflows of $8.248 billion, while junk bond funds posted outflows of $905 million (from Lipper). .

"Investors are flooding the state and local government debt market with cash, driving the biggest weekly influx ever into mutual funds focused on the riskiest municipal securities. Buyers added $2.6 billion to municipal-bond mutual funds in the week ended Wednesday, the 10th straight inflow and the third biggest on record… High-yield funds collected $1.1 billion, outpacing the previous record of $796 million in 2017…" Bloomberg (Danielle Moran and Romy Varghese)

  • Three-month Treasury bill rates ended the week at 0.0475%.
  • Two-year government yields slipped a basis point to 0.11% (down 1bp y-t-d).
  • Five-year T-note yields declined one basis point to 0.42% (up 6bps).
  • Ten-year Treasury yields declined two bps to 1.07% (up 15bps).
  • Long bond yields slipped two bps to 1.83% (up 19bps).
  • Benchmark Fannie Mae MBS yields declined a basis point to 1.43% (up 9bps).

All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of corporate debt issuance. While easy credit availability has supported economic activity,  funding new investment whilst keeping vulnerable companies afloat. THe combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.

Highights - Mortgages

  • Freddie Mac 30-year fixed mortgage rates fell four bps to 2.73% (down 78bps y-o-y).
  • Fifteen-year rates slipped a basis point to 2.20% (down 80bps).
  • Five-year hybrid ARM rates were unchanged at 2.80% (down 44bps).
  • Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 2.89% (down 85bps).

Highlights - Federal Reserve

  • Federal Reserve Credit last week expanded $12.9bn to $7.385 TN. Over the past year, Fed Credit expanded $3.267 TN, or 80%. Fed Credit inflated $4.574 Trillion, or 163%, over the past 429 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week fell $8.4bn to $3.533 TN.
  • "Custody holdings" were up $98.6bn, or 2.9%, y-o-y. M2 (narrow) "money" supply increased $10.0bn last week to a record $19.560 TN, with an unprecedented 47-week gain of $4.142 TN. "Narrow money" surged $4.210 TN, or 27.3%, over the past year.
  • For the week, Currency increased $8.3bn. Total Checkable Deposits sank $67.1bn, while Savings Deposits jumped $64.5bn. Small Time deposits fell $7.9bn. Retail Money Funds rose $12.2bn. Total money market fund assets gained $19.5bn to $4.327 TN.
  • Total money funds surged $705bn y-o-y, or 19.5%. Total Commercial Paper rose $10bn to $1.068 TN. CP was down $51bn, or 4.6%, year-over-year.
  • The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.

Highlights - European Bonds

  • Greek 10-year yields slipped a basis point to 0.68% (up 6bps y-t-d). Ten-year Portuguese yields declined three bps to 0.04% (up 1bp). Italian 10-year yields sank 11 bps to 0.64% (up 10bps). Spain's 10-year yields fell three bps to 0.10% (up 5bps).
  • German bund yields dipped one basis point to negative 0.52% (up 5bps). French yields were unchanged at negative 0.28% (up 6bps). The French to German 10-year bond spread widened one to 24 bps.
  • U.K. 10-year gilt yields increased two bps to 0.33% (up 13bps).

Highlights - Asian Bonds

  • Japanese 10-year "JGB" yields rose slightly to 0.05% (up 3bps y-t-d). .

 

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

Fed Financial Stability Report Risks May 2020

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

With the lack of stimulus and continued lockdowns initial jobless claims jumped to the highest level in three months last week, in what was a second straight weekly increase. November's job report again showed the effect of return to school as highlighted by well over 1 million women leaving the workforce and many men also to take care of their children not returning to work. What is clear is the disconnect from the realities by pundits, particarlarly partisn biased rhetoric of the true damage to the economy, the social fabric and the selling of that as a new normal. Covid19 brought with it a new reality of brutal times for workers.

Over 14.5 million are collecting traditional jobless benefits, up from 1.7 million a year ago, with no end in sight. on Thursday, the Labor Department reported under 800,000 Americans applied for unemployment benefits for the second time since the crisis.  With the Covid shutdown we lost over 22 million jobs in March and April. The September employment report, the last before the election, showed a slower pace of job growth than in August. There were 616,000 nonfarm payrolls, from 1.37 million in August. The unemployment rate expected dropped to 7.9% from 8.4%.As economies slowly reopened, the economy generated than 12 million jobs in May through September. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

US President-elect Joe Biden will be sworn in as America’s 46th President on Wednesday. Investors will be wary of any potential for armed protests in the lead-up to the event, especially as impeachment proceedings against US President Donald Trump continue. The primary concern in the markets will likely remain Biden’s expansive fiscal stimulus agenda. Biden announced a larger than expected $US1.9 Trillion worth of spending last week that will see higher direct payments to individuals, more money to combat the pandemic, and beefed-up support for state governments.

Stay alert to the political and geopolitical shifts with the world in flux. Government policies related to the environment, trade and tech sit high on the watch list.  Political and economic agendas that Influence policy-making is top of the list. For the US it is not just external threats, including increased political tensions between countries but also internal threats highlighted by the partisan impeachment devide. Politics influence all, directly or indirectly. 

The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences   In a  fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.

Global Watch

Hot Spots

  • Geopolitical tensions with China and India are on the rise as China increases military hardware near the China and India's Himalaya border, a potential negative shock not priced by markets.
  • US prepared to sanction Turkey over its purchase of Russian S-400 air defence systems last year.
  • China tightened its grip on Hong kong and threats with Taiwan continue. Secretary of State Mike Pompeo lifted communication restrictions between American and Taiwanese officials on Saturday. Pompeo said the restrictions had been imposed decades ago "in an attempt to appease the Communist regime in Beijing.”
  • Russia is showing the affects of low energy prices, filtering into the socio economic dynamic
  • A Brexit deal was concluded on Christmas Eve and moving rapidly through the approval process from both sides for the official start of the UK outside of Europe on Jan. 1st.
  • For emerging markets the lower US dollar is helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however.
  • Over $4 trillion of EM debt matures by the end of 2020, of which around a third is denominated in foreign currency, according to the Institute of International Finance. Nevertheless Banks are telling investors to buy, buy, buy, who is selling you should ask?

    If you wanted to play in the big room at Vegas, you are living it. Understand risk and the madness of crowds for your own sanity and wealth.

  • Continued volatility with the engulfing uncertainty of the Coronavirus and in commodity markets, particularly in oil and other commodities, not to mention unrest in Iran, Libya and Iraq. 

 

Trade Wars

  • Despite all the US and Chinese rhetoric  continues as the end of the Trump admin nears
  • Trump did say Phase 2 will be difficult and he sees the virus more important then trade with China..
  • In addition to rising tensions with China, the United States Trade Representative said last month said that the USTR is considering a new round of tariffs on $3.1 billion in European exports from France, Germany, Spain and the U.K..

 

Fat Tail Virus Risk

Following Pfizer's vaccine the week before Moderna’s Covid-19 vaccine  gained approvalto an emergency use authorization and rollout. Moderna’s drug, like Pfizer’s, is a two-dose vaccine and was found in clinical trials to be more than 94% effective. The U.S. is recording at least 216,600 new Covid-19 cases and at least 2,600 virus-related deaths each day, based on a seven-day average calculated by CNBC using Johns Hopkins University data.

COVID has methodically dispersed itself in areas like California and New York. Troubling development for hospitals and healthcare systems facing limited capacity and scarce resources. Ominously, outbreaks have slammed many northern states early in the winter season. Over the coming weeks, the virus can be expected to shadow cooler weather advancing south

CNB on December 23: "The U.S. began vaccinating the population against the coronavirus last week, but mass adoption is not a guarantee. Nearly 4 in 10 Americans say they would 'definitely' or 'probably' not get a vaccine, according to a Pew Research Center survey of 12,648 U.S. adults from Nov. 18 to 29."

Several countries are tightening restrictions and contemplating lockdowns as infections accelerate, prompting concerns about the impact on world economies attempting to recover. Earlier this month when adjusting for population, the number of new coronavirus infections in Europe has now overtaken the United States in new cases per million people, based on a seven-day average.

Covid Global cases 11 15 2020

  • AstraZeneca and Johnson and Johnson (J&J) announced they had received permission to resume trials on a COVID-19 vaccine. AstraZeneca was on track to have a vaccine ready before the end of the year, while J&J had said its candidate would be ready by early next year.
  • The US deals with a number of pharmaceutical giants have topped roughly $10.79 billion as part of Operation Warp Speed, a program led by several departments within the federal government to accelerate the development, manufacturing, and distribution of vaccines and treatments to fight the coronavirus.
  • The operation aims to provide at least 300 million doses of a coronavirus vaccine by January 2021. The companies are Moderna Johnson & Johnson Sanofi and GlaxoSmithKline Pfizer and BioNTech Novavax and AstraZeneca
  • Hopes and fears of reopening can outweigh mixed earnings results. No surprise after increased testing, weeks of protesting, people in large airconditioning indoors we have record daily U.S. cases. The U.S. reported 1000 deaths 4 days in a row with coronavirus cases,
  • There does appear to a concerted effort to put the blame on an economy reopening and miraclously the mass ongoing priotests have nothing to do with that. Take that for what it is worth. There is little mention of the younger age group in the new cases and much lower mortality rate. Fear is the feature. Use commonsense in your own protection, spreading and decision making.

 

Banks

The major money cents banks have released earnings with mixed results for Q4:

 

  • Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don't exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.
  • Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.
  • Last year Morgan Stanley continues in its aim to become the leading wealth and investment services firm with another aggressive aquisition. $MS announced an intention to buy Eaton Vance $EV for $7 billion. This follows the bank completing its $13 bln acquisition of E*TRADE $ETFC.
  • In times of recession and credit tightening Banks risk becomes problematic, though since 2008 the World's Central Banks have been quick to loosen the strings. Add massive QE and purcahse failing assets.
  • Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 trillion. Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008. 

BE AWARE: Stay rational and be prepared for many alternatives, either way. With crisis comes opportunity. From a market point of view this is not unprecedented, many other bubbles have popped with similar results. What is unprecedented is the pandemic, the mass media and social media fear mongering, the massive QE and printing and the strange era of entitlement and no responsibilty fed down from politicians to the youth of today for electoral purproses.

Put all that together and we see the result.  Again this isn't unprecedented just a different catalyst and fuel. Stay tuned. take a breath and think clearly. Oh and now we have the riots to throw on the kindling ....

  • Expect the Fed Stability Report warning on what happens if the pandemic worsens to be the go tto by Fed speakers (We are all watching to see if I spike aftet the Floyd protests and riots with no social distancing).
  • The backdrop is the Covid-19 crisis. Despite that the stockmarket is up over 40% from lows and stubborn bears and bulls alike are frustrated based on cognitive biases.
  • We continually focus on overcoming our biases and as the accompanying chart highlights stocks and the economy are NOT the same thing despite what we are told by our influencers and biased or selective recalls. 

 

"Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch"

Akio Morita mistakes

The Week Ahead - Have a Trading Plan

 

Central Bank Watch speeches, reports and rate moves

Monday: February 1 2021

  • Monday,
    • 20:30 AUD RBA Governor Lowe Speaks 22:30 AUD RBA Interest Rate Decision (Jan) 22:30 AUD RBA Rate Statement

    Tuesday Feb 2, 2021

    • None Seen

    Wednesday Feb 3, 2021

    • 05:30 EUR German Buba Wuermeling Speaks 12:30 EUR German Buba Vice President Buch Speaks 13:00 USD FOMC Member Bullard Speaks 14:00 USD FOMC Member Harker Speaks 17:00 USD Chicago Fed President Evans Speaks 17:00 USD FOMC Member Mester Speaks 18:05 USD FOMC Member Kaplan Speaks

    Thursday February 4, 2021

    • 04:00 EUR ECB Economic Bulletin
    • 07:00 GBP BoE Interest Rate Decision (Feb)
    • 14:00 USD FOMC Member Daly Speaks
    • 17:30 AUD RBA Governor Lowe Speaks
    • 19:30 AUD RBA Monetary Policy Statement

    Friday January 8, 2021

    • None Seen

    Improvements in some economic indicators, such as home sales, manufacturing activity and  in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.

    Economic Events in the Week Ahead:

    Sunday, January 31, 2021

    • 15:00 AUD AIG Manufacturing Index (Jan) 
    • 17:00 AUD Manufacturing PMI
    • 19:00 KRW Trade Balance (Jan)
    • 19:00 AUD MI Inflation Gauge (MoM) '
    • 19:30 KRW Nikkei Manufacturing PMI (Jan)
    • 19:30 AUD ANZ Job Advertisements (MoM)
    • 19:30 AUD Home Loans (MoM)
    • 19:30 JPY Manufacturing PMI (Jan)
    • 20:45 CNY Caixin Manufacturing PMI (Jan)

    Monday, February 1  2021

    • 00:30 AUD Commodity Prices (YoY)
    • 02:00 EUR German Retail Sales (MoM) (Dec)
    • 02:30 CHF Retail Sales (YoY) (Dec)
    • 03:15 EUR Spanish Manufacturing PMI (Jan)
    • 03:30 CHF procure.ch PMI (Jan)
    • 03:45 EUR Italian Manufacturing PMI (Jan)
    • 03:50 EUR French Manufacturing PMI (Jan)
    • 03:55 EUR German Manufacturing PMI (Jan)
    • 04:00 EUR Italian Monthly Unemployment Rate (Dec)
    • 04:00 EUR Manufacturing PMI (Jan)
    • 04:30 GBP Manufacturing PMI (Jan)
    • 05:00 EUR Unemployment Rate (Dec)
    • 09:30 CAD Manufacturing PMI (Jan)
    • 10:00 USD Construction Spending (MoM) (Dec)
    • 10:00 USD ISM Manufacturing PMI (Jan)
    • 11:30 USD 3-Month Bill Auction
    • 11:30 USD 6-Month Bill Auction
    • 14:00 USD Loan Officer Survey
    • 16:30 AUD AIG Manufacturing Index
    • 18:00 KRW CPI (MoM) (Jan)
    • 19:00 USD Total Vehicle Sales
    • 20:30 AUD RBA Governor Lowe Speaks
    • 22:30 AUD RBA Interest Rate Decision (Jan)
    • 22:30 AUD RBA Rate Statement

    Tuesday, February 2, 2021

    • 02:45 EUR French CPI (MoM)
    • 03:00 EUR Spanish Unemployment Change
    • 04:00 EUR Italian GDP (QoQ) (Q4)
    • 05:00 EUR GDP (QoQ) (Q4)
    • 07:00 BRL Industrial Production (MoM) (Dec)
    • 08:00 SGD Manufacturing PMI (Jan)
    • 08:55 USD Redbook (MoM) -1.6%
    • 10:00 USD ISM NY Business Conditions (Jan)
    • 10:00 USD ISM-New York Index (Jan)
    • 10:00 USD IBD/TIPP Economic Optimism
    • 10:30 NZD GlobalDairyTrade Price Index
    • 14:00 USD FOMC Member Mester Speaks
    • 14:00 USD FOMC Member Williams Speaks
    • 16:30 USD API Weekly Crude Oil Stock
    • 16:30 AUD AIG Construction Index (Dec)
    • 16:45 NZD Employment Change (QoQ) (Q4)
    • 16:45 NZD Labor Cost Index (QoQ) (Q4)
    • 16:45 NZD Unemployment Rate (Q4)
    • 17:00 AUD Services PMI
    • 19:00 USD Total Vehicle Sales
    • 19:00 NZD ANZ Commodity Price Index (MoM)
    • 19:30 AUD Building Approvals (MoM) (Dec)
    • 19:30 AUD Private House Approvals (Dec)
    • 19:30 AUD RBA Chart Pack Release
    • 19:30 JPY Services PMI (Jan)
    • 19:30 HKD Manufacturing PMI (Jan)
    • 20:30 AUD RBA Governor Lowe Speaks
    • 20:45 CNY Caixin Services PMI (Jan)

    Wednesday February 3, 2021

    • 03:00 EUR ECB Monetary Policy Statement
    • 03:15 EUR Spanish Services PMI (Jan)
    • 03:45 EUR Italian Composite PMI (Jan)
    • 03:45 EUR Italian Services PMI (Jan)
    • 03:50 EUR French Markit Composite PMI (Jan)
    • 03:50 EUR French Services PMI (Jan)
    • 03:55 EUR German Composite PMI (Jan)
    • 03:55 EUR German Services PMI (Jan)
    • 04:00 EUR Markit Composite PMI (Jan)
    • 04:00 EUR Services PMI (Jan)
    • 04:30 GBP Composite PMI (Jan)
    • 04:30 GBP Services PMI (Jan)
    • 05:00 EUR Italian CPI (MoM) (Jan)
    • 05:00 EUR Italian CPI (YoY) (Jan)
    • 05:00 EUR CPI (YoY) (Jan)
    • 05:00 EUR PPI (MoM) (Dec)
    • 05:30 EUR German Buba Wuermeling Speaks
    • 07:00 USD MBA 30-Year Mortgage Rate
    • 07:00 USD MBA Mortgage Applications (WoW)
    • 07:00 USD MBA Purchase Index
    • 07:00 USD Mortgage Market Index
    • 07:00 USD Mortgage Refinance Index
    • 08:15 USD ADP Nonfarm Employment Change (Jan)
    • 09:45 USD Markit Composite PMI (Jan)
    • 09:45 USD Services PMI (Jan)
    • 10:00 USD ISM Non-Manufacturing PMI (Jan)
    • 10:30 USD Crude Oil Inventories
    • 12:30 EUR German Buba Vice President Buch Speaks
    • 13:00 USD FOMC Member Bullard Speaks
    • 14:00 USD FOMC Member Harker Speaks
    • 16:45 NZD Building Consents (MoM) (Dec)
    • 17:00 USD Chicago Fed President Evans Speaks
    • 17:00 USD FOMC Member Mester Speaks
    • 18:05 USD FOMC Member Kaplan Speaks
    • 19:00 NZD ANZ Business Confidence (Dec)
    • 19:30 AUD NAB Quarterly Business Confidence
    • 19:30 AUD Trade Balance (Dec)

    Thursday, February 4, 2021

    • 01:45 CHF SECO Consumer Climate (Q1)
    • 02:45 EUR French Industrial Investments (Q1)
    • 04:00 EUR ECB Economic Bulletin
    • 03:30 EUR IHS Markit Construction PMI (Jan)
    • 04:30 GBP Construction PMI (Jan)
    • 05:00 EUR Retail Sales (MoM) (Dec)
    • 07:00 GBP BoE Interest Rate Decision (Feb)
    • 07:30 USD Challenger Job Cuts (Jan)
    • 08:30 USD Jobless Claims
    • 08:30 USD Nonfarm Productivity (QoQ) (Q4)
    • 08:30 USD Unit Labor Costs (QoQ) (Q4)
    • 10:00 USD Factory Orders (MoM) (Dec)
    • 10:30 USD Natural Gas Storage
    • 11:30 USD 4-Week Bill Auction
    • 11:30 USD 8-Week Bill Auction
    • 14:00 USD FOMC Member Daly Speaks
    • 16:30 AUD AIG Services Index (Dec)
    • 17:30 AUD RBA Governor Lowe Speaks
    • 18:00 KRW Current Account (Dec)
    • 18:30 JPY Household Spending (MoM) (Dec)
    • 18:50 JPY Foreign Reserves (USD) (Jan)
    • 19:30 AUD RBA Monetary Policy Statement
    • 19:30 AUD Retail Sales (MoM) (Dec)

    Friday, February 5, 2021

    • 00:00 JPY Coincident Indicator (MoM) (Dec)
    • 00:00 JPY Leading Index (MoM) (Dec)
    • 00:00 SGD Retail Sales (MoM) (Dec)
    • 02:00 EUR German Factory Orders (MoM) (Dec)
    • 02:45 EUR French Current Account (Dec)
    • 02:45 EUR French Non-Farm Payrolls (QoQ) (Q4)
    • 02:45 EUR French Trade Balance (Dec)
    • 03:30 GBP Halifax House Price Index (MoM) (Jan)
    • 04:00 EUR Italian Retail Sales (MoM) (Dec)
    • 06:30 EUR ECB's Enria Speaks
    • 08:30 GBP BoE Gov Bailey Speaks
    • 08:30 USD Average Hourly Earnings (MoM) (Jan)
    • 08:30 USD Average Weekly Hours (Jan)
    • 08:30 USD Government Payrolls (Jan)
    • 08:30 USD Manufacturing Payrolls (Jan)
    • 08:30 USD Nonfarm Payrolls (Jan)
    • 08:30 USD Participation Rate (Jan)K
    • 08:30 USD Private Nonfarm Payrolls (Jan)
    • 08:30 USD Trade Balance (Dec)
    • 08:30 USD U6 Unemployment Rate (Jan)
    • 08:30 USD Unemployment Rate (Jan)
    • 08:30 CAD Employment Change (Jan)
    • 08:30 CAD Full Employment Change (Jan)
    • 08:30 CAD Part Time Employment Change (Jan)
    • 08:30 CAD Trade Balance (Dec)
    • 08:30 CAD Unemployment Rate (Jan)
    • 08:30 EUR ECB's De Guindos Speaks
    • 10:00 CAD Ivey PMI (Jan) '
    • 13:00 USD U.S. Baker Hughes Oil Rig Count
    • 15:00 USD Consumer Credit (Dec)
    • 15:30 USD CFTC speculative net positions

    Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. 

     

    Short Squeeze Watch

     Image

    Earnings Week Ahead

    Big banks kicked off 4th-quarter earnings reports on Jan 15, helping to set the tone for the broader U.S. stock market, as businesses cope with the eleventh month of the pandemic. Banks reaped the rewards of the initial public offerings and record corporate borrowings during the pandemic. Investors (and algos) will focus pn the conference calls and outlooks. Everyone is expecting the worse. We will see critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals.

    Last week we heard from Kimberly-Clark, Johnson & Johnson, General Electric, 3M, AMD, Microsoft. Starbucks Boeing, Abbott Laboratories, Apple, Facebook, Tesla, McDonald’s, Mastercard, Visa Skyworks Solutions, Honeywell, Chevron, Caterpillar and Eli Lilly

    This week we hear from:

    • Monday starts us off with Warner music group NXP
    • Tuesday with earnings from NXP UPS Pfizer Alphabet Chipotle Amazon
    • Wednesday Earnings Include Humana Qualcomm PayPal eBay Sony
    • Thursday Earnings Include Thursday Merck Bristol-Myers Squibb Clorox Company Activision Blizzard Ford
    • Friday Earnings include Regeneron Sanofi Estée Lauder Cardinal Health

    IPO Week Ahead

    The IPO market is expected to remain active in the week ahead with nine IPOs scheduled to raise $2.7 billion.

  • Canadian digital service provider TELUS International (TIXT) plans to raise $800 million at a $6.4 billion market cap. The company provides customer service outsourcing and end-to-end customer experience and digital technology solutions and services. Fast growing and profitable, TELUS grew revenue 53% in the 9mo20. The company is planning a dual listing on the NYSE and TSX.

  • German chemical group Atotech (ATC) plans to raise $700 million at a $3.8 billion market cap. Atotech is a specialty chemical producer offering electroplating solutions, with a leading share of the electronics and general metal finishing markets. The company has resilient margins and strong cash flow generation, though it will be leveraged post-IPO despite using IPO proceeds to pay down debt.

  • Virtual communication platform ON24 (ONTF) plans to raise $409 million at a $2.6 billion market cap. ON24 is a B2B and B2C platform that enables businesses to create webinars, virtual events, and content experiences for customer and business engagement. The company turned profitable in the 9mo20, and growth accelerated to 59%.

  • Cell therapy biotech Sana Biotechnology (SANA) plans to raise $323 million at a $4.0 billion market cap. This preclinical biotech is developing in vivo and ex vivo cell engineering platforms to treat a range of diseases including cancer, diabetes, and CNS disorders. The company’s candidates are all in preclinical development, with IND submissions expected in 2022 and 2023.

  • Following its IPO attempt in 2015, loanDepot (LDI) plans to raise $300 million at a $6.5 billion market cap. This nonbank lender provides loan origination and servicing with a focus on mortgage and unsecured personal loans. Fast growing and profitable, the company saw revenue triple and gross margin expand 23 percentage points in the 9mo20.

  • Autoimmune biotech Landos Biopharma (LABP) plans to raise $100 million at a $650 million market cap. This Phase 2 biotech uses its AI-driven platform, LANCE, to discover and develop oral small molecule therapeutics for the treatment of autoimmune diseases. The company’s lead candidate is currently in a Phase 2 trial for mild to moderate ulcerative colitis. Holdover urban-gro (UGRO) plans to raise $45 million at a $97 million market cap. The company provides engineering and design services for the integration of environmental equipment systems in indoor facilities. The company is unprofitable and saw revenue decline in the 9mo20.

  • Chinese fertilizer producer Muliang Viagoo Technology (MULG) plans to raise $40 million at a $194 million market cap. This company manufactures and sells organic fertilizer under the brand names “Zongbao,” “Fukang,” and “Muliang”. While the company is profitable, it saw a 26% decrease in revenue in the 9mo20.

  • Danish biotech Evaxion Biotech (EVAX) plans to raise $30 million at a $233 million market cap. This Phase 1/2 biotech uses their proprietary AI-driven platforms to develop novel immunotherapies for the treatment of cancers, bacterial diseases, and viral infections. Its lead candidates, EVX-01 and EVX-02, are currently in Phase 1/2a trials for various cancer indications.

    IPO data via Renaissance Capital

     Image

    -comment section below data-

    Last Week's Big Stories

    The Week That Was - Last Weeks Recap

    • Into The Vortex - EIA Reports Draw of -134 Bcf in Natural Gas Inventories
    • Around The Barrel - Crude Oil Draws As Product Stocks Rise Strongly
    • OPEC Monthly Oil Market Report January 2020
    • EIA Expects Natural Gas Prices To Rise On Rising Domestic Demand, LNG Exports and Reduced Production
    • EIA Says New Oil Drilling Activity Production Will Not Offset Existing Wells Declines
    • US Employment Continues To Recover From Coronavirus Lockdown
    • Federal Reserve Leaves Rates and Bond Buying Unchanged After Election
    • U.S. New Auto Sales Fell For First Time Since April in Uncertain Times
    • Mexico Business Confidence Improves With Peso and Easing Covid Restrictions
    • RBA Cuts Australian Rates To Record Low 0.25%, Targets Yield Curve
    • US Manufacturing Continues Recovery, New Orders Highest Since January 2004 

    Stocks

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    Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.

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