Market Talk

Google Ad

Where have we been and where are we going? Join our weekly market thread on Traders Community...

FEAR NOT Brave Investors

Freezing Cold

 Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.

Bitcoin, Inflation and Polar Vortex

The Week That Was - What Lies Ahead?

Editorial

Another week and another week of the S&P and NASDAQ closing at record highs. After a test of the downside the small cap Russell 2000, though it did not close at a record had the biggest gain this week. Risk and rationality is being distracted with the second Trump impeachment drama on in Washington coupled with new Covid cases and hospitalizations dropping as the vaccination rollout continues to build. While last week the Democrats said they had decided to move forward quickly with Biden’s $1.9 TN stimulus proposal through budget reconciliation to the bullish narrative, cracks appear in a one thought Democratic agaenda and clearly the division between Red and Blue has widened rather than come together.

Inflationary pressures are building, and a truly tidal wave of Treasuries is in the pipeline. Not hard to grasp Bond market nervousness. The 10-year Treasury inflation “breakeven rate” added another two bps this week to 2.22%, the high since July 2014. Friday’s University of Michigan one-year inflation expectations in February surged to 3.3% (up from December’s 2.5%) the highest since July 2014. The Bloomberg Commodities Index closed the week at the highest level since November 2018 and is already up 7.7% y-t-d. Energy prices are surging with WTI closing just under $60 a barrel at $59.63, Natural gas finished the week at 2.90 btu with the threat of 11 degrees and snow in Houston, at the end of February! The Polar Vortex sees deep snow and negative temperatures across much of America. The pressure building from lower production and threats by the Biden Admin to the US energy structure in it's Green strategy adds to threats to energy security.

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. 

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 gained 1.2% (up 4.8% y-t-d)
  • The Dow increased 1.0% (up 2.8%).
  • The Utilities fell 2.0% (down 0.3%). The Banks rose 2.2% (up 10.9%), and the Broker/Dealers surged 5.2% (up 14.4%). The Transports advanced 3.0% (up 5.3%).
  • The S&P 400 Midcaps jumped 2.7% (up 10.3%), The small cap Russell 2000 rose 2.5% (up 15.9%).
  • The Nasdaq100 gained 1.5% (up 7.1%).
  • The Semiconductors surged 7.9% (up 15.2%). The Biotechs were little changed (up 8.6%).
  • Though bullion gained $10, the HUI gold index declined 0.8% (down 5.1%).

 US Indices W 2 12 2021

Highlights - Europe

  • France's CAC40 increased 0.8% (up 2.7%).
  • Germany's DAX equities index was unchanged (up 2.4%).
  • Spain's IBEX 35 equities index fell 1.9% (down 0.2%).
  • Italy's FTSE MIB index gained 1.4% (up 5.3%).
  • U.K.'s FTSE equities index rose 1.5% (up 2.0% y-t-d).

 

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 jumped 2.6% (up 7.6% y-t-d).
  • South Korea's Kospi index dipped 0.6% (up 7.9%).
  • India's Sensex equities index rose 1.6% (up 7.9%).
  • China's Shanghai Exchange surged 4.5% (up 5.2%).

 

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

Japan's Nikkei Equities Index rallied 4.0% (up 4.9% y-t-d).

.

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 rallied mostly with the lead of the US markets
  • Brazil's Bovespa index declined 0.7% (up 0.3%),
  • Mexico's Bolsa was little changed (up 0.3%).
  • South Korea's Kospi index dipped 0.6% (up 7.9%).
  • India's Sensex equities index rose 1.6% (up 7.9%).
  • China's Shanghai Exchange surged 4.5% (up 5.2%).
  • Turkey's Borsa Istanbul National 100 index increased 0.7% (up 4.2%).
  • Russia's MICEX equities index rose 1.0% (up 4.2%).

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

 Top 5 SPX Stocks W 2 12 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 2 12 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 2 12 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 2 12 2021

Apple $AAPL

 AAPL W 2 12 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 2 12 2021

Energy and Commodities

Highights

  • The Bloomberg Commodities Index gained 1.9% (up 7.7% y-t-d).
  • WTI crude surged $2.65 to $59.47 (up 23%).
  • Gasoline jumped 2.6% (up 20%),
  • Natural Gas gained 1.7% (up 15%).
  • Copper surged 4.5% (up 8%).
  • Wheat slipped 0.7% (unchanged).
  • Corn fell 2.2% (up 11%).
  • Bitcoin jumped $10,088, or 26.6%, this week to $47,947 (up 65%).
  • 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 2 12 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 2 12 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 2 12 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 W 2 12 2021

US Natural Gas (Henry Hub)

US Natural Gas completed were its B or IV ( Bull Case), Bear is this 3 wave is a C of B, bull a developing 5. We saw a kiss of life when Tenkan retested Kijun. Support is Cloud and tenkan. Resistance is 8/8 and recent highs. 

NG D 2 12 2021 

Natty spat the 50 wma  to get over weekly kijun and tenkan which are now support with the cloud.  Talking fractals, remember the tenkan/kijun kiss of death brought it down from the $2 range. Now we have the beginnongs of a kiss of life. Resistance is recent highs and Fib/Murrey confluence.

 

NG W 2 12 2021 

Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold rallied 0.6% to $1,824 (down 3.9%).
  • Silver jumped 1.6% $27.36 (up 3.6%).

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 D 2 12 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 2 12 2021 

 

Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Highlights

  • For the week,the the U.S. dollar index declined 0.6% to 90.48 (up 0.6% y-t-d).
  • Majors for the week. on the upside, the Australian dollar rose 1.1%, the British pound 0.8%, the Swiss franc 0.8%, the euro 0.6%, the Canadian dollar 0.5% and the Japanese yen 0.4%
  • Minors for the week  For the week on the upside, the South African rand increased 2.0%, the South Korean won 1.5%, the Swedish krona 0.8%, the Norwegian krone 0.8%, the Singapore dollar 0.7%, the Mexican peso 0.7%, and the New Zealand dollar 0.4%. The Chinese renminbi increased 0.11% versus the dollar this week (up 1.07% 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 2 12 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 2 12 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 2 12 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 2 12 2021

British Pound - USDGBP

 GBP D 2 5 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 2 12 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 2 12 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 2 12 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 2 12 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 2 12 2021

Bond Markets (and Fed Watch)

Highlights - Treasuries

The 10-year Treasury inflation “breakeven rate” added another two bps this week to 2.22%, the high since July 2014. Friday’s University of Michigan one-year inflation expectations in February surge to 3.3% (up from December’s 2.5%) the highest since July 2014. The Bloomberg Commodities Index closed out the week at the highest level since November 2018 – already up 7.7% y-t-d. Energy prices are surging. Ten- and 20-year Treasury yields ended the week at the highs since February.

 TNX W 2 12 2021

Investment-grade bond funds saw inflows of $2.730 billion, while junk bond funds posted outflows of $228 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 0.02%.
  • Two-year government yields slipped a basis point to 0.10% (down 2bps y-t-d).
  • Five-year T-note yields rose four bps to 0.46% (up 10bps).
  • Ten-year Treasury yields jumped 10 bps to 1.17% (up 25bps).
  • Long bond yields surged 14 bps to 1.97% (up 33bps).
  • Benchmark Fannie Mae MBS yields gained three bps to 1.46% (up 12bps).

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

U.S. home prices have been fueled by the lowest mortgage rates in history and relocation demand have risen rose at the fastest pace on record, surpassing the peak from the last property boom in 2005. The median price of a single-family home climbed 14.9% to $315,000 in the fourth quarter, the biggest surge in data going back to 1990. The Northeast led the way with a 21% gain.”

  • Freddie Mac 30-year fixed mortgage rates were unchanged at 2.73% (down 77bps y-o-y).
  • Fifteen-year rates slipped two bps to 2.19% (down 78bps).
  • Five-year hybrid ARM rates added a basis point to 2.79% (down 49bps).
  • Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 2.84% (down 77bps).

Highlights - Federal Reserve

The Fed has doubled its balance sheet to $7.4 TN over the past 74 weeks, the Fed is now locked and loaded into a policy course that will see an additional $120 billion of liquidity injected into the markets on a monthly basis well into the future, QE infinity. Recall the initial $1.0 TN of QE all the way back in 2008 was employed to accommodate post-Bubble deleveraging when the Fed basically transferred over a Trillion dollars of Treasuries and MBS from highly levered institutions during that sub prime bubble period with no tilt to moral hazard.

The story was this expansion of Federal Reserve Credit was offset by a corresponding contraction of speculative leverage, leaving overall system liquidity only marginally impacted, and here we are. Yes we understand the COVID response and why, the important point is here this is not temporary and is an ongoing learning period for the Fed. This has come with that no concept of a downside with US politicians and hence the ongoing sense of entitlement, what does that mean and where does that lead?

We do know we have massive speculation pockets, viz a viz the Meme or GameStop, Weed stocks and cryptocurrency spectacles in just the matter of weeks. The Fed is today throwing additional fuel on historic speculative manias. The US two-year federal deficit is on target poised to exceed $6.0 TN, or approaching 30% of GDP. NFD likely exceeded $7.0 TN last year, while M2 “money supply” inflated an incredible $3.724 TN, or 24%.

  • Federal Reserve Credit last week jumped $21.2bn to a record $7.388 TN. Over the past year, Fed Credit expanded $3.253 TN, or 79%. Fed Credit inflated $4.577 Trillion, or 163%, over the past 431 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week gained $4.4bn to $3.536 TN. "Custody holdings" were up $77.3bn, or 2.2%, y-o-y.
  • M2 (narrow) "money" supply added $3.0bn last week to $19.415 TN. "Narrow money" surged $3.947 TN, or 25.5%, over the past year.
  • For the week, Currency increased $4.6bn.
  • Total Checkable Deposits declined $4.8bn,
  • Savings Deposits added $4.2bn. Small Time deposits fell $4.2bn.
  • Retail Money Funds increased $3.3bn. Total money market fund assets gained $6.2bn to $4.317 TN. T
  • otal money funds surged $692bn y-o-y, or 19.1%. Total Commercial Paper jumped $19.7bn to $1.077 TN. CP was down $37bn, or 3.3%, 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 0.75% (up 13bps y-t-d). Ten-year Portuguese yields gained four bps to 0.11% (up 8bps). Italian 10-year yields dropped six bps to 0.48% (down 7bps). Spain's 10-year yields increased three bps to 0.16% (up 11bps).
  • German bund yields rose two bps to negative 0.43% (up 14bps). French yields gained three bps to negative 0.20% (up 14bps). The French to German 10-year bond spread widened one to 23 bps.
  • U.K. 10-year gilt yields jumped five bps to 0.52% (up 32bps)

Highlights - Asian Bonds

  • Japanese 10-year "JGB" yields were little changed at 0.07% (up 5bps 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 political theater returns with Donald Trump’s second impeachment trial. House impeachment managers are preparing to prosecute the former president on the charge of “incitement of an insurrection” for inflaming the mob that attacked the Capitol last month. Opening arguments begin Tuesday. Prosecutors argue that Mr. Trump was “singularly responsible” for the Jan. 6 attack and a broader attack on democracy that showed he would do anything to “reassert his grip on power” if he were allowed to seek election again. Mr. Trump’s lawyers have denied that he incited the assault on the Capitol and will argue that the Senate has no power to try a former president. Mr. Trump’s words to supporters, they say, are protected by his First Amendment right to free speech. Mr. Trump has refused to testify. A guilty verdict would require at least 17 Republicans to join all 50 Democrats in voting to convict

President Biden gave his strongest indication yet that he’ll push for swift action on coronavirus relief for the U.S. economy without Republican support, as House lawmakers cleared the way for passing his $1.9 trillion stimulus plan with only Democratic votes. Biden signaled he was resigned to his minimum-wage hike not being a part of the bill. “Apparently, that’s not going to occur because of the rules of the United States Senate,” he said in a CBS interview. The $15 an hour proposal was panned by Republicans, who sought to block it in the Senate.

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.
  • Mario Draghi’s appointment as PM in a coalition government. China liquidity conditions eased significantly, with China’s overnight funding rate collapsing to 1.88% from the previous Friday’s 3.33%. Global anxiety that Beijing might finally be determined to rein in Bubble excess was quickly supplanted by exultation that Chinese officials wouldn’t dare risk it. Curiously, the Shanghai Composite gained only 0.4%, recovering but a fraction of the previous week’s drop. Perhaps Chinese equities discern this week’s loosened liquidity conditions were only a temporary phenomenon - with further tightening measures to follow over the coming weeks and months..
  • 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

  • Tradw wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it's beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia's standing up to Chinese bullying.
  • 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..We are awaiting Biden's offical resposne.
  • Chairamn Chi and President Biden had a phone hook up this week with the US saying they will review all policies but tariffs to stand in the meantime. China continued it's theats on the matter. 

 

Fat Tail Virus Risk

COVID-19 cases, hospitalizations, and deaths continue to fall in the United States from the holiday surge of infections. The US saw a 23-percent decline in cases this week, and on February 8, the U.S. recorded fewer than 80,000 new daily cases for the first time since late October—down from a peak of 295,000 new cases on January 8. Deaths have also declined for the second straight week, although there were still more than 19,000 lives lost this week.

 Covid deaths 2 13 2021

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. 

 

"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

 

Next week, investors will focus on quarterly corporate results from Cisco Systems Inc, General Motors Co and Walt Disney Co as well as data on U.S. consumer prices. but most important is the fiscal stimulus package making its way through Congress. Market chatter turned to rising interest rates, the steepening yield curve and market expectations for inflation. "Rates are actually going up as really an expression of the potential that economic activity is likely to start accelerating, and we'll likely see some inflation," said Art Hogan, chief market strategist at National Securities. Hogan said investors will stay most focused on the $1.9 trillion stimulus package, which Democrats are pushing forward. If it is signed into law at its current size, the total federal spending due to the pandemic would be $5.3 trillion, according to Cowen, an investment bank. Federal Reserve chairman Jerome Powell speaks mid-week at a webinar hosted by the Economic Club of New York.

Central Bank Watch speeches, reports and rate moves

Monday: February 15 2021

  • Tentative EUR German Buba Monthly Report
  • 19:30 AUD RBA Meeting Minutes

Tuesday Feb 16, 2021

  • 15:00 FOMC Member Daly Speaks
  • 20:00 RBA Assist Gov Kent Speaks

Wednesday Feb 10, 2021

  • 08:00 EUR ECB President Lagarde Speaks
  • 08:00 EUR ECB's Panetta Speaks
  • 11:30 CAD BoC Gov Council Member Lane Speaks
  • 12:00 GBP BoE Gov Bailey Speaks
  • 14:00 USD Fed Chair Powell webinar at the Economic Club of New York

Thursday February 11, 2021

  • 03:00 ECB's De Guindos Speaks

Friday February 12, 2021

  • 10:00 a.m. New York Fed President John William

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, February 14, 2021

  • 18:50 JPY GDP (QoQ) (Q4) '
  • 18:50 JPY GDP Capital Expenditure (QoQ) (Q4)
  • 18:50 JPY GDP External Demand (QoQ) (Q4)
  • 18:50 JPY GDP Price Index (YoY)
  • 18:50 JPY GDP Private Consumption (QoQ) (Q4) 1
  • 8:55 KRW Trade Balance (Dec)
  • 19:00 SGD GDP (QoQ) (Q4)
  • 19:01 GBP Rightmove House Price Index (MoM)
  • 21:30 JPY Capacity Utilization (MoM) (Dec)
  • 21:30 JPY Industrial Production (MoM) (Dec)

Monday, February 15 2021

  • All Day Holiday United States - Presidents' Day
  • All Day Holiday Hong Kong - New Year's Day A
  • ll Day Holiday Canada - Family Day
  • All Day Holiday China - Spring Festival
  • All Day Holiday Brazil - Carnival
  • 02:00 EUR German GDP (YoY)
  • 05:00 EUR Eurogroup Meetings
  • 05:00 EUR Industrial Production (MoM) (Dec)
  • 05:00 EUR Trade Balance (Dec)
  • Tentative EUR German Buba Monthly Report
  • 06:00 EUR Reserve Assets Total (Jan)
  • 08:30 CAD Manufacturing Sales (MoM) (Dec)
  • 16:00 KRW Export Price Index (YoY) (Jan)
  • 16:00 KRW Import Price Index (YoY) (Jan)
  • 18:55 KRW Trade Balance (Jan)
  • Tentative AUD HIA New Home Sales (MoM)
  • 19:30 AUD RBA Meeting Minutes
  • 23:30 JPY Tertiary Industry Activity Index (MoM)

Tuesday, February 16, 2021

  • All Day Holiday China - Spring Festival
  • All Day Holiday Brazil - Carnival
  • 01:30 EUR French Unemployment Rate (Q4)
  • 04:00 EUR Italian Trade Balance (Dec)
  • 05:00 EUR German ZEW Current Conditions (Feb)
  • 05:00 EUR German ZEW Economic Sentiment (Feb)
  • 05:00 EUR Employment Change
  • 05:00 EUR GDP (QoQ) (Q4)
  • 05:00 EUR ZEW Economic Sentiment (Feb)
  • 08:15 CAD Housing Starts (Jan)
  • 08:30 USD NY Empire State Manufacturing Index (Feb)
  • 08:30 CAD Foreign Securities Purchases (Dec)
  • 08:30 CAD Foreign Securities Purchases by Canadians (Dec)
  • 09:30 NZD GlobalDairyTrade Price Index
  • 11:30 USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 15:00 USD FOMC Member Daly Speaks 
  • 16:00 USD TIC Transactions (Dec)
  • 18:00 JPY Reuters Tankan Index (Feb) '
  • 18:30 AUD MI Leading Index (MoM)
  • 18:50 JPY Core Machinery Orders (MoM) (Dec) '
  • 18:50 JPY Trade Balance (Jan)
  • 19:30 SGD Non-Oil Exports (MoM) (Jan)
  • 20:00 AUD RBA Assist Gov Kent Speaks
  • 22:00 KRW M2 Money supply (Dec)

Wednesday February 17, 2021

  • All Day Holiday China - Spring Festival
  • All Day Holiday Brazil - Ash Wednesday
  • 02:00 GBP Car Registration (MoM) (Jan)
  • 02:00 GBP CPI (MoM) (Jan)
  • 02:00 GBP PPI Input (MoM) (Jan)
  • 02:00 GBP PPI Output (MoM) (Jan)
  • 02:00 EUR Italian Car Registration (MoM) (Jan)
  • 02:00 EUR German Car Registration (MoM) (Jan)
  • 02:00 EUR German WPI (YoY) (Jan) -
  • 02:00 EUR French Car Registration (MoM) (Jan)
  • 03:00 EUR ECB Monetary Policy Statement
  • 04:30 GBP House Price Index (YoY)
  • 05:00 EUR Construction Output (MoM) (Dec)
  • 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
  • 08:30 USD PPI (MoM) (Jan)
  • 08:30 USD Retail Sales (MoM) (Jan)
  • 08:30 CAD CPI (MoM) (Jan)
  • 08:55 USD Redbook
  • 09:00 USD FOMC Member Barkin Speaks
  • 09:15 USD Capacity Utilization Rate (Jan)
  • 09:15 USD Industrial Production (MoM) (Jan)
  • 09:15 USD Manufacturing Production (MoM) (Jan)
  • 10:00 USD Business Inventories (MoM) (Dec)
  • 10:00 USD NAHB Housing Market Index (Feb)
  • 10:00 USD Retail Inventories Ex Auto (Dec)
  • 11:00 GBP MPC Member Ramsden Speaks
  • 14:00 USD FOMC Meeting Minutes
  • 16:30 USD API Weekly Crude Oil Stock
  • 19:30 AUD Employment Change (Jan)
  • 19:30 AUD Full Employment Change (Jan)
  • 19:30 AUD Participation Rate (Jan)
  • 19:30 AUD Unemployment Rate (Jan)
  • 21:00 NZD RBNZ Offshore Holdings (Jan) /li>

Thursday, February 11, 2021

  • All Day Holiday Japan - National Day
  • All Day Holiday China - Spring Festival
  • All Day Holiday South Korea - New Year's Day '
  • 02:00 EUR German WPI (YoY) (Jan)
  • 03:00 EUR ECB's De Guindos Speaks
  • 04:00 USD IEA Monthly Report
  • 04:30 ZAR Gold Production (YoY) (Dec)
  • 04:30 ZAR Mining Production (Dec)
  • 05:00 EUR EU Economic Forecasts
  • 07:00 USD OPEC Monthly Report
  • 08:30 USD Jobless Claims
  • 10:30 USD Natural Gas Storage
  • 11:00 USD Cleveland CPI (MoM) (Jan)
  • 11:00 USD Fed Monetary Policy Report
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • 13:00 USD 30-Year Bond Auction
  • 16:30 NZD Business NZ PMI (Jan)
  • 16:45 NZD FPI (MoM) (Jan)

Friday, February 12, 2021

  • All Day Holiday Singapore - Chinese New Year
  • All Day Holiday Hong Kong - New Year's Day
  • All Day Holiday China - Spring Festival
  • All Day Holiday South Korea - New Year's Day
  • 02:00 GBP Business Investment (QoQ) (Q4)
  • 02:00 GBP Construction Output (MoM) (Dec)
  • 02:00 GBP GDP (QoQ) (Q4)
  • 02:00 GBP Industrial Production (MoM) (Dec)
  • 02:00 GBP Manufacturing Production (MoM) (Dec) '
  • 02:00 GBP Trade Balance (Dec)
  • 02:30 CHF CPI (MoM) (Jan)
  • 03:00 EUR Spanish CPI (MoM) (Jan)
  • 03:00 EUR Spanish HICP (MoM) (Jan)
  • 08:30 CAD Wholesale Sales (MoM) (Dec)
  • 09:00 GBP NIESR Monthly GDP Tracker
  • 10:00 USD FOMC Member Williams Speaks
  • 10:00 USD Michigan Consumer Sentiment (Feb)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 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

Last week saw off the bulk of the official end of earnings season, which has been better than most predicted after 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 expected the worse, we saw 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 Hasbro, KKR, Loews Corp., Softbank, Dun and Bradstreet, Take Two Interactive, Nuance, Leggett and Platt, Simon Property Group, Cisco, Twitter, Lyft, Dupont, Mattel, Honda, Nissan, Centene, Hanesbrands, Canopy Growth, Martin Marietta Materials, Masco, Sealed Air, S&P Global, Hains Celestial , Fox Corp, Akamai, Owens-Illinois. Coca-Cola, General Motors, Uber, Zillow, Under Armour, Cerner, Zynga, iRobot, MGM Resorts, Spirit Airlines, Lumen Technologies, Molina Healthcare, O'Reilly Automotive, Wyndham Hotels, PepsiCo, Walt Disney, Kraft Heinz, Expedia, AstraZeneca, Generac, Virtu Financial, Yeti, Kellogg, AllianceBernstein, Borg Warner, Duke Energy, Molson Coors, Tyson Foods, ArcelorMittal, Moody's, Newell Brands, ING Groep

This week we hear from:

  • Monday starts us off with none seen due to President's Day
  • Tuesday with earnings from CVS Health, Zoetis, Ring Central and Occidental
  • Wednesday Earnings Include Shopify, Twilio, Fastly, Pioneer Natural Resources and Boston Beer
  • Thursday Earnings Include Walmart, Barrick Gold, Applied Materials, Roku, The Trade Desk
  • Friday Earnings include Deere and Magna

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

    Subscribe and Follow

    Find us at www.traderscommunity.com

    • Follow our contributors on Twitter @traderscom @thepitboss16 @knovawave @ClemsnideClem

    ----

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

    Trade Smart!

Log in to comment
Discuss this article in the forums (21 replies).

Google ads