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FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Iran, 2020 and No Fear
The Week That Was:
The first week of 2020 began with a huge gap up in stocks and closed the week with chaos after the US assassinated Iranian Maj. Gen. Qassem Soleimani in an airstrike early Friday morning at Baghdad International Airport. Supreme Leader Ayatollah Ali Khamenei said a “vigorous vengeance awaits” those responsible for his death, and the nation’s president, Hassan Rouhani, said Iran “will take revenge for this heinous crime.”
The White House confirmed that President Trump ordered the drone strike against Soleimani, who led the Quds Force of the Islamic Revolutionary Guards Corps. He was considered the architect of Iran’s strategic operations in the proxy war against the United States. Oil gapped higher on the news over $2.50 an S&P futures gapped down 50 handles to close down about 20 as the market remains in BTFD mode. Gold and silver soared with the yen and dollar on the news, Economic news contrinues to be miserable with global PMIs all soft, Over in Australia the country is being ravaged by bush fires the largest and most deadly ever seen.
Who Benefits From War?
Major Sectors in The US S&P 500 After Friday’s Military Strike
Last week we noted political and geopolitical shifts have created big question marks with the world in flux. This has shifted even further with the US strikes putting forex and oil volatilty on high alert. 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 trade war and trade relationships have the potential to impact growth strategies with unexpected consequences with this markets also be vulnerable. There is little doubt political uncertainty has become more widespread. With regard to the trade deal It is all dependant on so many factors, clearly the dealing isn’t complete. In a fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.
Again we hit extended all time highs in the S&P 500 in a larger economically depressed global world. Is the market ahead of it’s self? Behind it all is world wide low interest rates and QE pump priming by the world’s major central banks, the Federal Reserve, Swiss National Bank and ECB all preached more of the same.
The put call ratio, Vix and talking heads underscore there is no fear out there. We remain just off new all time highs for the Dow Jones Industrial Average, S&P 500 and Nasdaq. What happens if music for pass the parcel stops playing? What if on China and the U.S. the market calls their bluff?. There is a reason why so many experienced fund managers are closing up shop.
The market has shrugged off Brexit, impeachment and geopolitical powder keg risk and Fed injecting 60 Billion into the system to maintain liquidity, in its not QE4 program.The consumer has been keeping the economy robust.
Poltically we have the growing antagonistic and partisan split of the impeachment of the POTUS, in the UK and Europe we have the daily Brexit news cycle. Happy New Year!
Britain’s parliament will reconvene on Jan 7 and will debate the divorce deal Prime Minister Boris Johnson has agreed with Brussels. The bill goes to parliament’s upper house on Thursday and should allow Johnson to fulfil his pledge to “get Brexit done” by Jan. 31..
Given the history, markets seem overly optimistic about trade, some would say negligently. The market wants to believe the trade war is constructive, we have warned for over a year about the nonsense of the trade war nearing an end BUT economics not being the market. The market has become nothing more than a casino. Very simply you have two different cultures two different political systems and shaming doesn’t do well in either. Read the recent reports with open eyes.
This is a market full of players that think its different this time, sure its different negative rates all around, trillions of worthless debt, unstable politics and Central Bankers putting their thumb in their mouths and seeing which way the wind blows. The fear of missing out and blind partisan politcs creates intertesting bed fellows. Be alert and put your ear plugs in and watch the whole spectrum its all related, geopolitical, debt markets, commodities, stocks, herds, greed and entitlement,
The spectre of Deutschbank overhangs Europe as does the new British PM, Boris Johnson. Their are other spectres out their we just don’t know it, or want to.
“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”
We remind you to stay on your toes, ad nauseum we repeat; In this surreal world that market prices can only go up, with bizzare acceptance that we can’t go down and you are a fool if you think otherwise. In saying that the old saying, the trend is your friend rings true.
The Week Ahead
This week we could see more volatility in still illiquid markets with stocks just off all time highs and geopolitical risk on high alert with President Trump under pressure at home and abroad.
We have Iran and oil markets front and center, the pending phase one trade deal between American and China, the Brexit statement in the UK and the US jobs report Friday. Energy reports will be keenly watched this week.
The U.S. politically remains combustible, led by Democrat impeachment, Turkey, Iran and Saudi moves, trade wars and repo rates. The market continues to focus on “phase one” of the U.S. China trade talks.
Watch for the MBA mortgage report also it has had huge swings each week and is key to the economy and homebuilders. In the U.S. investors will be watching data that can help us gauge trade war fallout.
U.S. goods are more expensive due to a stronger dollar boosted by geopolitical woes and negative interest rates in Europe. The dollar index hit a 29-month high on Sept. 3. Investors are also transfixed by oil prices in reaction to the Saudi attack and recovery and military respsonses.
Global Composite and Services PMI
US Canada and Australia International trade, US ISM nonmanufacturing and Factory orders, API Crude Oil Inventories
US ADP Jobs, EIA Crude Oil Inventories, Consumer credit
- Thursday US MBA Mortgage Applications, US Initial Jobless Claims,
- Friday US and Canada Employment, Wholesale trade, Baker Hughes Oil Rig Count, CFTC Speculative net positions
For emerging markets the high US dollar means the Fragile 5 continue to shake. Argentina and Turkey are red letter risks. Voters will also be going to the polls in Poland, Indonesia, the Philippines and Thailand this year.
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.
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2019. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. We still have China and the U.S.trade wars.
Earnings The earnings reporting has dried to a halt with the holidays. Of note however the S&P 500’s “forward earnings yield” at 5.28% is the lowest since 2008. Lowest prior to this is the week of January 26th, 2018, when it closed the week at 5.35%. That week vol spiked dramatically and the S&P 500 corrected 8% in two weeks.
We start off on Monday with: Cal-Maine Foods, Commercial Metals
Tuesday Earnings Include: ANGO Angiodynamics, EXFO Exfo, PCYO Pure Cycle. NTIC Northern Technologies, CPIX Cumberland Pharmaceuticals
Wednesday Earnings Include: Walgreens Boots Alliance, Constellation Brands, Lennar, RPM International, MSC Industrial, Bed Bath & Beyond
Thursday Earnings Include: Monday Acuity Brands, Lindsay, Simply Good Foods, KB Home, PriceSmart, Synnex
Friday Earnings Include: Infosys
-comment section below data-
Geopolitical Tinderbox Radar
Last Week’s Big Stories
The Week That Was – Last Weeks Recap
- Around The Barrel – EIA Reports Large Year End Crude Oil Draw With Record Oil Production
- Into The Vortex – EIA Reports -161 Bcf Draw in Natural Gas Storage
- Think Weather Models Are Flawed? They May Get Worse With 5G
- Amazon Battles Add To FedEx Uncertainty After Earnings Miss
- West African Nations Sever Common Currency To France and Euro
- Goldman Sachs Raises Gold Forecast Another 8.5% on MMT and 2020 Presidential Election
- Amazon Battles Add To FedEx Uncertainty After Earnings Miss
- Nike Earnings and Revenue Rise on Margin Expansion in Nike Direct and Converse
- Rite Aid Surprise Profit Pops Stock 45% in Short Market
- Adobe Prints Record $11 Billion in Annual Revenue On In Line Earnings
- The US Consumer Loves Deals, Ollie’s Bargain Outlet Follows Big Lots Earnings Beat
- Toll Brothers Home Sales Revenue Down But Contract Value Rising
Biggest Stock Winners and Losers Last Week*
Which Stocks Moved US ETF’s Last Week
US Stock Indices Performance
The SPX showed the first impulse down in this manic wave 5 or 3 Friday but managed to close back at the daily Tanken after holding the speedline, again all the hallmarks of a melt up, +3/8 Daily MM over the chikou in 5 violent waves. The question is this a wave 5 and of what degree? Best alternatives (v) of wave V or wave iii higher, Speed and channel lines in tune with algo calibration curve. Note Chikou rebalance in order.
After more impulse as Weekly SPX tapped the top channel we got a sharp impulse down after new all time highs, Below we have Kijun and tenkan. Below channel, watch if a spit or clear break support is 50 wma as chikou rebalances
Semiconductors ETF – SMH
(Another ATH Leading underlying strength of US Indices)
CBOE VIX INDEX
Data via Ole S Hansen @Ole_S_Hansen
VIX caution: Not only did the net-short hit a record but so did the percentage of total open interest which reached 50%. History tells us that positions this elevated could leave the short side very vulnerable to a sudden change in direction $SPX $SVXY $XIV
Speculators increased their VIX futures net-short by 17k lots to a RECORD 188k lots in the wk to Oct. 29. During the past month the #SPX rally has helped widen the contango thereby fueling short-selling strategies though futures and inverse ETFs $SVXY and $XIV.
10 Year Treasury Note
Energy and Commodities
US Crude Oil (WTI)
WTI continues to roll higher with tenkan at support in the right shouldr/wedge channel with ES_F. A fall through tenkan would suggest failure. Support through tenkan, Kijun and 50 dma zone over the cloud. Rebalancing Chikou and MM 8/8 overbought caution Watch the channel. The impulse meant a C or (Y) complete.
WTI rally shapes correctional shoulder from the May left shoulder after the sharp impulse higher through 50 WMA and the cloud top key supports remain Kijun and 50wma confluence (green), Resuosatnce channel and fib conflageration with MM 4.8
US Natural Gas (Henry Hub)
Natural Gas shaping as a 1-2 inside the babson lines and median channel. Needs to get back through the Tenkan for impulse higher. Recall it was rejected at the weekly tenkan last bounce, downside held October break up . Resistance from cloud down from impulse. On bounce rebalancing with chikou. Gap above. Correcting the Murrey Math 1/8 and Wave iii or Alt C high. Support also near lows and channel from underneath
Natty failed again to get back over old trendline break from impulse down after Natural Gas rally rejected at the 61.8% and the March highs with the tenkan and Kijun now resistance around retest of 2.50-52 band after uptrend support at 2.34. Watch for Kijun/Tenkan cross after retesting the weekly channel break.
Baltic Dry Index (BDI)
After Gold finally cracked the Tenkan it continued to run after correcting in 3 waves from 1556 to Murrey Math +2/8. Support is Kijun while market decides. From there a C or 3? Watch Fibs and chikou. Watching for corrective 2 waves to tell us what this move is.
Silver sharp reversal higher continued off 50 wma, a much more violent impulse than gold after correcting the 3 or C rallied off the 50% after it rallied in 3 waves to retest the September 2017 breakdown After Tenkan and Kijun crossed – boom. There is also a chance this is an X. We watch recent lows if this a 4 down or C complete
Australian Dollar – AUDUSD
The Aussie dollar reversed hard after breaching the cloud. Below the 50 wdma and then the Kijun and tenkan which are now support. Fell after the move to MM +1/8 first target.
New Zealand Dollar – NZDUSD
The Kiwi bounce faltered much like the AUD and came back mthrough the cloud. We are watching as Tenkan and Kijun trying to cross back through which could bring the ‘kiss of death’. The Chikou needs to rebalance.
Canadian Dollar – USDCAD
The USDCAD couldn’t to fall after was rejected hard at the 50wma and cloud, closing the week under old channel, tenkan and Kijun and break up level. Resistance top of cloud and 50 wma. The tenkan remains the pivot aspect.
Euro – EURUSD
Euro tested top of channel after held tenkan with Kijun closing through it – watch for impulse down if starts to break wedge, Again governed by $EURGBP and #Bund volatility. Support pennant break. Unless this is a spit the potential of the measured move comes in around 1.0630 and lower. EUR remains a battle between EURJPY and EURCHF.
EuroPound – EURGBP
EURGBP back testing tenkan after bounce, weekly cloud is well above and resistance is the May breakup reflecting Brexit politics. Resistance at kijun withr Tenkan support and Nov 2017 lows
Japanese Yen – USDJPY
Classic failure at USDJPY after weeks over the weekly Kijun and closed at 50 wma and the cloud twist but couldnt get legs up. It was drawn by 38% and Murrey 6/8. It broke out of Wedge as Kijun stayed flat. Yen buying on crosses, EURJPY and AUDJPY taking away the cloud twist that drew the dollar up.
Mexican Peso USDMXN
Found support at last Gann octave as Mexican peso gave up some of recent gains after it held the cloud. Flat Kijun and Tenkan pulling after the USMC trade deal. Watch if a fractal spit on recent highs.
Turkish Lire USDTRY
USDTRY impulse higher continued after found support at daily Kijun and Tenkan to get back above cloud Impulse is needed to pull away from here. Support is the previous break up and tenkan and Kijun. Keep an eye on geopolitical risk factors.
Nothing new for Bitcoin, more of the same as it continues to falter after 61.8% spit. Well under the tenkan and kijun. Needs to test downtrend for higher correction. Use your MM rules as algos control the herd here, support is the cloud – we said be wary of sharp ABC, 1-2 moves.
The Week Ahead
Key US Economic and Central Bank Events This Week
Sun January 5, 2020
- 13:15 CAD BoC Gov Council Member Wilkins Speaks
- 16:00 KRW FX Reserves – USD
- 16:30 AUD AIG Manufacturing Index (Dec)
- 19:30 JPY Manufacturing PMI (Dec)
- 19:30 HKD Manufacturing PMI (Dec)
- 20:45 CNY Caixin Services PMI (Dec)
Monday, January 6, 2020
- 02:00 EUR German Retail Sales (MoM) (Nov)
- 03:15 EUR Spanish Services PMI (Dec)
- 03:45 EUR Italian Composite PMI (Dec)
- 03:45 EUR Italian Services PMI (Dec)
- 03:50 EUR French Markit Composite PMI (Dec)
- 03:50 EUR French Services PMI (Dec)
- 03:55 EUR German Composite PMI (Dec)
- 03:55 EUR German Services PMI (Dec)
- 04:00 EUR Markit Composite PMI (Dec)
- 04:00 EUR Services PMI (Dec)
- 04:30 GBP Composite PMI (Dec)
- 04:30 GBP Services PMI (Dec)
- 04:30 EUR Sentix Investor Confidence (Jan)
- 05:00 EUR PPI (MoM) (Nov)
- 08:30 CAD IPPI (MoM) (Nov)
- 08:30 CAD RMPI (MoM) (Nov)
- 09:45 USD Markit Composite PMI (Dec)
- 09:45 USD Services PMI (Dec)
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 14:30 USD CFTC speculative net positions
- 17:00 AUD Services PMI
- 18:00 KRW Current Account (Nov)
- 18:50 JPY Monetary Base (YoY)
- 19:30 AUD ANZ Job Advertisements (MoM)
- 19:30 JPY Services PMI (Dec)
- 22:35 JPY 10-Year JGB Auction
Tuesday January 7, 2020
- All Day Holiday Russia – Christmas
- 02:00 CNY FX Reserves (USD)
- 02:30 CHF CPI (MoM) (Dec)
- 03:30 HKD Foreign Reserves (USD) (Dec)
- 04:00 EUR Italian Public Deficit (Q3)
- 04:00 SGD Foreign Reserves USD (MoM) (Dec)
- 05:00 EUR Italian CPI (MoM) (Dec)
- 05:00 EUR Italian HICP (MoM) (Dec)
- 05:00 EUR CPI (YoY) (Dec)
- 05:00 EUR Retail Sales (MoM) (Nov)
- 05:30 GBP Housing Equity Withdrawal (QoQ)
- 06:30 EUR Spanish Consumer Confidence
- 08:30 USD Trade Balance (Nov)
- 08:30 CAD Trade Balance (Nov)
- 08:55 USD Redbook (MoM)
- 09:50 NZD GlobalDairyTrade Price Index
- 10:00 USD Durables Excluding Defense (MoM) (Nov)
- 10:00 USD Factory Orders (MoM) (Nov)
- 10:00 USD ISM Non-Manufacturing PMI (Dec)
- 10:00 CAD Ivey PMI (Dec)
- 13:00 USD 3-Year Note Auction
- 16:30 USD API Weekly Crude Oil Stock
- 16:30 AUD AIG Construction Index (Dec)
- 18:30 JPY Average Cash Earnings (YoY)
- 18:30 JPY Overall wage income of employees (Nov)
- 18:30 JPY Overtime Pay (YoY) (Nov)
- 19:30 AUD Building Approvals (MoM) (Nov)
- 19:30 AUD Private House Approvals (Nov)
- 19:30 AUD RBA Chart Pack Release
Wednesday, January 8, 2020
- 00:00 JPY Household Confidence (Dec)
- 02:00 EUR German Factory Orders (MoM) (Nov)
- 02:45 EUR French Consumer Confidence (Dec)
- 02:45 EUR French Current Account (Nov)
- 02:45 EUR French Reserve Assets Total (Dec)
- 02:45 EUR French Trade Balance (Nov)
- 03:30 GBP Halifax House Price Index (MoM) (Dec)
- 04:30 GBP Labour Productivity (Q3)
- 05:00 EUR Business and Consumer Survey (Dec)
- 05:00 EUR Business Climate (Dec)
- 05:00 EUR Consumer Confidence (Dec)
- 05:00 EUR Consumer Inflation Expectation (Dec)
- 05:00 EUR Selling Price Expectations (Dec)
- 05:00 EUR Services Sentiment (Dec)
- 05:00 EUR Industrial Sentiment (Dec)
- 06:30 EUR Spanish Business Confidence
- 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 (Dec)
- 10:30 USD Crude Oil Inventories
- 13:01 USD 10-Year Note Auction
- 15:00 USD Consumer Credit (Nov)
- 16:30 AUD AIG Construction Index (Dec)
- 19:00 NZD ANZ Commodity Price Index (MoM)
- 19:01 GBP BRC Retail Sales Monitor (YoY) (Dec)
- 19:01 GBP RICS House Price Balance (Dec)
- 19:30 AUD Trade Balance (Nov)
- 20:30 CNY CPI (MoM) (Dec)
- 20:30 CNY PPI (YoY) (Dec)
Thursday, January 9 2020
- 02:00 EUR Gemran Trade Balance (Nov)
- 02:00 EUR German Industrial Production (MoM) (Nov)
- 02:30 CHF Retail Sales (YoY) (Nov)
- 04:00 EUR Italian Monthly Unemployment Rate (Nov)
- 04:00 EUR Italian Retail Sales (MoM) (Nov)
- 05:00 EUR Unemployment Rate (Nov)
- 07:30 USD Challenger Job Cuts (Dec)
- 07:30 EUR ECB Publishes Account of Monetary Policy Meeting
- 08:15 CAD Housing Starts (Dec)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 CAD Building Permits (MoM) (Nov)
- 10:30 USD Natural Gas Storage
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 13:01 USD 30-Year Bond Auction
- 14:00 CAD BoC Gov Poloz Speaks
- 16:30 AUD AIG Services Index (Dec)
- 18:30 JPY Household Spending (MoM) (Nov)
- 18:50 JPY Foreign Reserves (USD) (Dec)
- 19:30 AUD Retail Sales (MoM) (Nov)
Friday Jan 10, 2020
- 00:00 JPY Coincident Indicator (MoM) (Nov)
- 00:00 JPY Leading Index (MoM) (Nov)
- 00:00 SGD Retail Sales (MoM) (Nov)
- 01:45 CHF Unemployment Rate s.a. (Dec)
- 02:45 EUR French Industrial Production (MoM) (Nov)
- 04:00 EUR Italian Industrial Production (MoM) (Nov)
- 08:30 USD Average Hourly Earnings (YoY) (YoY) (Dec)
- 08:30 USD Average Hourly Earnings (MoM) (Dec)
- 08:30 USD Average Weekly Hours (Dec)
- 08:30 USD Government Payrolls (Dec)
- 08:30 USD Manufacturing Payrolls (Dec)
- 08:30 USD Nonfarm Payrolls (Dec)
- 08:30 USD Participation Rate (Dec)
- 08:30 USD Private Nonfarm Payrolls (Dec)
- 08:30 USD U6 Unemployment Rate (Dec)
- 08:30 USD Unemployment Rate (Dec)
- 08:30 CAD Employment Change (Dec)
- 08:30 CAD Full Employment Change (Dec)
- 08:30 CAD Part Time Employment Change (Dec)
- 08:30 CAD Participation Rate (Dec)
- 08:30 CAD Unemployment Rate (Dec)
- 10:00 USD Wholesale Inventories (MoM)
- 12:00 USD WASDE Report 13:00
- USD U.S. Baker Hughes Oil Rig Count
- 14:30 JPY CFTC JPY speculative net positions
- 16:30 AUD AIG Services Index (Dec)
Saturday, Jan 11, 2020
Stock Buyback Watch
Via Emad Mnati @EmadMnati and MarketBeat
Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.