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FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Trade Wars, Oil, PMI and Repo Rate
The Week That Was:
The week started off with oil soaring over 14%, the most since 1991 after Houthi rebels from Yemen launched successful drone attacks on the world’s biggest petroleum processing facility in Saudi Arabia. However oil gave up half that gain after Aramaco said they were back to 70%, 100% by end of September and customers won’t be affected. America’s Pompeo immediately blamed Iran whilst POTUS and KSA were not as quick, pointing the finger to proxies. The US increased sanctions on Iran and announced they will be sending US personnel to help with securing Saudi Arabia for the future.
Chairman Jerome Powell delivered a 25bp cut and gave a speech that could be best described as doublespeak. FedEx warned from the trade war fall out . The cut followed the ECB cut it’s deposit facility rate 10 bps and is reintroducing QE options. Brazil also cut their rates 50bp. The SNB and BoE both left rates unchanged.
Of concern the interest rate on U.S. overnight repurchase agreements (Repo) slipped on Friday after an operation conducted by the New York Federal Reserve that parked $75 billion in temporary cash in the U.S. banking system. The repo rate was last 1.85%-1.95%, compared with 1.90%-2.00% before the latest repo operation. They ended at 1.75% late on Thursday after hitting 10% on Tuesday, according to Refinitiv data. The U.S. central bank has conducted a series of cash-adding moves since Tuesday as repo and other money market rates soared to levels not seen since the height of the global financial crisis in 2008. Memories of Lehman overhang.
The U.S. started a 15% tariff on about $110 billion in apparel, footwear and other Chinese imports last Sunday, with same duty on the balance of almost $300 billion in toys, phones and laptops and other products delayed until Dec. 15. The levy is increasing on that already in effect on $250 billion in other Chinese goods to 30% from 25% starting Oct. 1, the 70th anniversary of the founding of the People’s Republic of China.
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. Very simply you have two different cultures two different political systems and shaming doesn’t do well in either.
We still have confusion with the whole mess that is Brexit though Italy’s political situation improved. Negative rates, as foolish as history will remember them are the theme of the moment.
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”
The indices are gamed by a few high delta stocks leading the way with massive leverage and a game of chicken on daily.
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. We have had mixed economic data, no concrete decision on the China and EU trade wars and a No Deal Brexit looking more likely. Here we are (see what ya wanna see).
The Week Ahead
Another big week for potential volatility, led by Iran and Saudi moves, trade wars and repo rates. Globally we get the preliminary PMI reports. In the U.S. will be watching data that can help us gauge trade war fallout. Investors will be transfixed by oil prices in reaction to the Saudi attack and recovery and military respsonses.
- Monday Australia French Germany Italy Spain UK US PMI’s, New York Fed President John Williams at N.Y. Fed conference on Treasury market, US Manufacturing & Services PMI, San Francisco Fed President Mary Daly, St. Louis Fed President James Bullard
- Tuesday German IFO Business Climate, Current Assessment and Expectations. US S&P/Case-Shiller home prices, FHFA home prices, Consumer confidence, API Crude Oil Stocks, RBNZ Interest Rate Decision
- Wednesday Germany GFK Consumer Confidence, Chicago Fed President Charles Evans, Cleveland Fed President Esther George, New home sales, Crude Oil Stocks, Dallas Fed President Robert Kaplan
- Thursday Real GDP Q2 (third), Advance economic indicators, Dallas Fed’s Kaplan, St. Louis Fed’s Bullard, Pending home sales, Natural Gas Stocks, Fed Vice Chairman Richard Clarida, San Francisco Fed’s Daly, Minneapolis Fed President Neel Kashkari, Richmond Fed President Tom Barkin
- Friday EU Business Climate Indicator. Consumer Confidence, Economic Sentiment Indicator Services Confidence and Industrial Confidence, US Personal Consumption Expenditure, Income and Spending Durable goods. Consumer sentiment. Fed Vice Chairman Randal Quarles. Philadelphia Fed President Patrick Harker, Baker Hughes Oil and Gas Rigs
To repeat AGAIN …With the trade war, most analysts still say a US-China trade deal will remain out of reach regardless for some time. On repeat “Again the issue is the disconnect between the story telling about the China deal and inconclusion between the Tories and Labor in the UK. What could go wrong?”
It is now over six months since the latest trade deal between the United States with China deadline of March 1. The White house said it needs more time, then turned around and slapped more tariffs on and said hey we are still talking. Are we the only one that sees the constant reset to keep markets elevated? If you have half a non partisan brain it should be all pretty clear the great game going on.
For emerging markets the high US dollar means the Fragile 5 continue to shake. Argentina and Turkey are red letter risks. Argentina Oct. 27 general election with current President Macri, a free-marketeer came to power in 2015 is expected to lose the general election to Fernandez, whose running mate, populist ex-leader Cristina Fernandez de Kirchner sends chills down the spine of global investors and big business. 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 last week included; Ra Medical RMED Federal Express FDX Adobe Systems ADBE Chewy Inc CHWY Cracker Barrel CBRL General Mills Darden Restaurants Collplant CLGN
We start off on Monday with: Cantel Medical CMD, Hailiang Education Group Ads HLG
Tuesday Earnings Include: Nike NKE, Autozone AZO, THS Markit INFO, Cintas CTAS, Carmax KMX, Jabil JBL, Blackberry BB, Manchester United MANU
Wednesday Earnings Include: KB Home KBH, VF Corp
Thursday Earnings Include: Accenture ACN, Micron Technology MU, Conagra CAG, Rite Aid RAD
Friday Earnings Include: Boston Scientific BSX
-comment section below data-
Geopolitical Tinderbox Radar
Last Week’s Big Stories
- American Household Wealth Grows $1.83 Trillion to New Record High
- Into The Vortex – EIA Reports +84 Bcf in Natural Gas Storage
- Banco Central do Brasil Cuts Benchmark Rate 50bps To Record Low
- Federal Reserve Lower Rates 25 bps as Expected, Moderate Economic Growth
- US Building Permits and Housing Starts Highest Levels in 12 Years Around
- The Barrel – Crude Oil and Gasoline Inventories Build With Production Near Record
The Week That Was – Last Weeks Recap
- FedEx Earnings Miss Warns of Trade Wars Policy Uncertainty
- Applied Materials Earnings Beat Expectations But China Trade War Drags
- NVidia Beat Earnings and Revenue Targets, Focus on AI Growing
- Tilray Reports Another Big Loss With Marijuana Selling Price Down A Third
- Barrick Gold Higher Production Doubles Profits With Rising Prices
Biggest Stock Winners and Losers Last Week*
Which Stocks Moved US ETF’s Last Week
US Stock Indices Performance
There was a reason why we kept harping on about this risk: The performance in shares of small-cap companies which are domestically focused than the large-cap firms is a concern for the optimism in the markets, belies the ATH optimism. The small-cap Russell 2000 index had gained 16.6% for the year, which has underperformed the benchmark S&P 500 index which had risen over 19.5%. Whereas the DJIA, NDX and SPX have marked new records highs, it remained 9.7% below its August 2018 high.
The $SPX continues to trade off our daily speed lines closed right around daily tenkan. The pennant with the bullish euphoria having the hall marks of an ABC double zig zag.through 61.8% with alternatives as complete or continuing. Note developing pennant (pink) Best alternatives are a (ii) of wave V higher, A of a larger 2 or this is i of something more powerful down. The alternative that the high was a B Plus and the recent low is a C also played out with new highs. Speed and channel lines in tune with algo calibration curve.
On the weekly SPX we see chaotic moves, with the Kijun and tenkan flattening underthe upper channel line. We are back at +2/8 Murrey Math recalc confluence testing 50 wma with the cloud and channel much lower.
10 Year Treasury Note
Energy and Commodities
US Crude Oil (WTI)
WTI gapped up through all resistance through channel, cloud, 50dma, kijun and daily tenkan, Finished at the the outer Gann channel and +8/8 It reversed sharply under tanken to kijun as Chikou rebalanced. Best counts are (Y) or still completing 2.
WTI spat the weekly 61.8% and trend on the gap up. Reversed back to Kijun and 50wma (green) above the Tenkan under the cloud after rejecting the break retest. Key From Last Week ” Expect more work and volatility. Watch Murrey confluence with the cloud acting.”
US Natural Gas (Henry Hub)
Natural Gas corrected off first target at Murrey +3/8 testing the tenkan in iv of (C) or (1). Below the Kijun and 50 dma and the daily cloud. Prices moved orderly through as Chikou rebalanced.
Natural Gas spat the weekly 50wma and 3/8 confluence. Below we watch the potential tenkan and Kijun kiss or crossover. Resistance MM & 50wma, support the weekly channel and the tenkan
Baltic Dry Index (BDI)
Gold continued lower after it completed it’s minimum target from the breakout. The question is this a C or 3? We bounced off the tenkan in 3 waves to form a 4. Like Silver watch Fibs and Tenkan and Kijun. Watching for corrective 2 waves to tell us what this move is.
Silver rallied in 3 waves to retest the September 2017 breakdown. Third wave was impulse as is the reversal – meaning C or 3 and we came back to rebalance Chikou and bounced off tenkan and 38% now support. Watch lower fibs with Kijun below.
Australian Dollar – AUDUSD
The Aussie dollar impulse continued towards Kijun and daily cloud after held outside channel and oversold at -1/8 Murrey Math Then hit Tenkan which sold it off again Still much repair work to be done into the cloud to get a meaningful bounce in with flat Kijun pulling.
New Zealand Dollar – NZDUSD
The Kiwi tested breakdown since the RBNZ cut but failed to hold on to momentum and reversed. The AUDUSD giving a good indication of what is going on via $AUDNZD, weekly channel in focus above tenkan holds it back. Chikou confluence at the downward channel rebalancing pulling.
Canadian Dollar – USDCAD
The USDCAD bounce failed at 50% and fell back through top of cloud finding some support at the tenkan to bounce back to Kijun giving us a clear band. Loonie continues to find balance in the cloud. The tenkan is now seen as the pivot aspect. Support is cloud base
Euro – EURUSD
Euro continued to recover after broke under the long weekly channel pennant after rejected by Kijun and Tenkan to find support at the outer band. Unless this is a spit the potential of the measured move becomes in around 1.0630 and lower. IF a spit than Tenkan is key. EUR remains a battle between EURJPY and EURCHF selling with EURGBP joining in this week.
EuroPound – EURGBP
EURGBP reflecting the madness of Brexit politics after reversed perfectly at the chikou and Murrey 6/8 (+2/8 recalc) to finish back under channel break under Tenkan, Below 50 wma and Kijun & top of cloud. Ask Boris?
Japanese Yen – USDJPY
The dollar yen recovery reflects trade war tweets under the tenkan. Still firmly in the channel breaking the tenkan cleanly to get legs higher with Kijun holding so far. Yen buying continued on the crosses, EURJPY and AUDJPY taking away the cloud twist that drew the dollar up.
Mexican Peso USDMXN
Mexican peso spat the upper channel hard to come all the way back through the Kijun and tenkan. The cloud will be a good focus for now. USDMXN is rebalancing chikou. Trade Wars and Argentina were not helping Mexico
Turkish Lire USDTRY
The USD Turkish Lire corrected much of the emerging market downdraft after the coiling between daily Kijun and tenkan brought impulse. The correction took it back to the cloud base and Kijun where it is finding support.
Bitcoin testing bottom of pennant thrown back at the 61.8% of the major move at pace once to the 38% and tenkan confluence to bounce to the 50%. Use your MM rules as algos control the herd here, support is the cloud and tenkan, be wary of sharp ABC, 1-2 moves.
The Week Ahead
Key US Economic and Central Bank Events This Week
Sun Sept 22, 2019
- 19:00 AUD Manufacturing PMI
- 19:00 AUD Services PMI
Monday, Sept 23, 2019
- All Day Holiday Japan – Autumn Equinox
- 01:00 SGD CPI (YoY) (Aug)
- 03:15 EUR French Manufacturing PMI (Sep)
- 03:15 EUR French Markit Composite PMI (Sep)
- 03:15 EUR French Services PMI (Sep)
- 03:30 EUR German Composite PMI (Sep)
- 03:30 EUR German Manufacturing PMI (Sep)
- 03:30 EUR German Services PMI (Sep)
- 04:00 EUR Spanish Trade Balance
- 04:00 EUR Manufacturing PMI (Sep)
- 04:00 EUR Markit Composite PMI (Sep)
- 04:00 EUR Services PMI (Sep)
- 06:00 GBP CBI Industrial Trends Orders (Sep)
- 06:00 EUR German Buba Monthly Report
- 08:30 USD Chicago Fed National Activity (Aug)
- 08:30 CAD Wholesale Sales (MoM) (Jul)
- 09:45 USD Manufacturing PMI (Sep)
- 09:45 USD Markit Composite PMI (Sep)
- 09:45 USD Services PMI (Sep)
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 17:00 KRW PPI (MoM) (Aug)
- 20:30 JPY Manufacturing PMI (Sep)
- 20:30 JPY Services PMI
Tuesday Sept 24, 2019
- All Day Holiday South Africa – Heritage Day
- 01:00 JPY Leading Index
- 01:35 JPY BoJ Governor Kuroda Speaks
- 02:45 EUR French Business Survey (Sep)
- 04:00 EUR German Business Expectations (Sep)
- 04:00 EUR German Current Assessment (Sep)
- 04:00 EUR German Ifo Business Climate Index (Sep)
- 04:30 GBP Public Sector Net Borrowing (Aug)
- 05:45 GBP 30-Year Treasury Gilt Auction
- 05:55 AUD RBA Governor Lowe Speaks
- 06:00 GBP CBI Industrial Trends Orders (Sep)
- 08:55 USD Redbook (MoM)
- 09:00 USD House Price Index (MoM) (Jul)
- 09:00 USD S&P/CS HPI Composite – 20 s.a. (MoM) (Jul)
- 10:00 USD CB Consumer Confidence (Sep)
- 10:00 USD Richmond Manufacturing Index (Sep)
- 10:00 USD Richmond Services Index (Sep)
- 13:00 USD 2-Year Note Auction
- 16:30 USD API Weekly Crude Oil Stock
- 18:45 NZD Trade Balance (MoM) (Aug)
- 19:50 JPY Corporate Services Price Index (CSPI) (YoY)
- 19:50 JPY Monetary Policy Meeting Minutes
- 22:00 NZD RBNZ Interest Rate Decision
- 22:00 NZD RBNZ Rate Statement
- 23:00 NZD RBNZ Press Conference
Wednesday, Sept 25, 2019
- 01:00 JPY BoJ Core CPI (YoY)
- 02:00 EUR GfK German Consumer Climate (Oct)
- 02:45 EUR French Consumer Confidence (Sep)
- 04:00 CHF ZEW Expectations (Sep)
- 04:30 GBP Gross Mortgage Approvals
- 05:40 EUR German 10-Year Bund Auction
- 06:00 GBP CBI Distributive Trades Survey (Sep)
- 06:00 EUR France Jobseekers Total
- 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
- 09:00 CHF SNB Quarterly Bulletin
- 10:00 USD New Home Sales (MoM) (Aug)
- 10:30 USD Crude Oil Inventories
- 13:00 USD 5-Year Note Auction
- Tentative KRW BOK Financial Stability Board Meeting
Thursday Sept 26, 2019
- 01:00 SGD Industrial Production (MoM) (Aug)
- 02:00 EUR GfK German Consumer Climate (Oct)
- 04:00 EUR Italian Trade Balance Non-EU (Jul)
- 04:00 EUR ECB Economic Bulletin
- 04:00 EUR M3 Money Supply (YoY) (Aug)
- 04:00 EUR Loans to Non Financial Corporations (Aug)
- 04:30 HKD Trade Balance
- 08:30 USD Core PCE Prices (Q2)
- 08:30 USD Corporate Profits (QoQ) (Q2)
- 08:30 USD GDP (QoQ) (Q2)
- 08:30 USD GDP Price Index (QoQ) (Q2)
- 08:30 USD Goods Trade Balance (Aug)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD PCE Prices (Q2)
- 08:30 USD Real Consumer Spending (Q2)
- 08:30 USD Wholesale Inventories (MoM)
- 10:00 USD Pending Home Sales (MoM) (Aug)
- 10:30 USD Natural Gas Storage
- 11:00 USD KC Fed Composite Index (Sep)
- 11:00 USD KC Fed Manufacturing Index (Sep)
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 19:01 GBP GfK Consumer Confidence (Sep)
- 19:30 JPY Tokyo CPI (YoY) (Sep)
- 21:30 CNY Chinese Industrial profit (YoY) (Aug)
- 22:00 SGD Bank Lending
Friday Sept 27, 2019
- 02:00 GBP Nationwide HPI (MoM) (Sep)
- 02:00 EUR German Import Price Index (MoM) (Aug)
- 02:45 EUR French Consumer Spending (MoM) (Aug)
- 02:45 EUR French CPI (MoM)
- 02:45 EUR French HICP (MoM)
- 02:45 EUR French PPI (MoM) (Aug)
- 03:00 GBP BoE MPC Member Saunders Speaks
- 03:00 EUR Spanish Retail Sales (YoY) (Aug)
- 03:15 EUR ECB’s De Guindos Speaks
- 04:00 EUR Italian Business Confidence (Sep)
- 04:00 EUR Italian Consumer Confidence (Sep)
- 05:00 EUR Italian CPI (MoM) (Sep)
- 05:00 EUR Italian PPI (MoM) (Aug)
- 05:00 EUR Business and Consumer Survey (Sep)
- 05:00 EUR Business Climate (Sep)
- 05:00 EUR Consumer Confidence (Sep)
- 05:00 EUR Services Sentiment (Sep)
- 05:00 EUR Industrial Sentiment (Sep)
- 06:15 EUR Spanish Business Confidence
- 08:30 USD Core PCE Price Index (MoM) (Aug)
- 08:30 USD Durable Goods Orders (MoM) (Aug)
- 08:30 USD FOMC Member Quarles Speaks
- 08:30 USD PCE price index (MoM) (Aug)
- 08:30 USD Personal Income (MoM) (Aug)
- 08:30 USD Personal Spending (MoM) (Aug)
- 08:30 USD Real Personal Consumption (MoM) (Aug)
- 10:00 USD Michigan Consumer Sentiment (Sep)
- 11:00 CAD Budget Balance (Jul)
- 12:00 USD FOMC Member Harker Speaks
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:30 USD CFTC Speculative net positions
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.