Day 3 of 2022 continued volatility morphing into Carnage as the Fed Minutes reminded the hawkishness of the last Fed Meeting. The highflyers that infested the Nasdaq and Russel and the ARK ETFs were trashed. Oil bounced strongly after its EIA but was dragged into the risk asset selling. On the speculative end we saw Bitcoin and Cryptocurrencies break levels lower. The 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. After yesterday’s 10-year yield rise was the largest first day jump since 2009 the yield increased four basis points to 1.67%.
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In today’s post market wrap live from the trading room traders discuss the patterns through the options and futures markets that have played out perfectly from last week to today. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 plot out 2022.
Market Closes
- WTI crude futures rose 1.1%, or $0.82, to $77.82/bbl.
- February Nymex natural gas (NGG22) on Wednesday closed up by +0.165 (+4.44%).
- Forecasts for below-normal U.S. temperatures, which should boost heating demand for nat-gas. Atmospheric G2 on Wednesday said that below-normal temperatures are expected in the East from Jan 10-14, and below-normal temperatures are seen in the northern tier U.S. states from Jan 15-19.
- BNEF data showed gas flows to U.S. export terminals Wednesday were up +13.3% y/y at 12.3 bcf, modestly below the Dec 19 record of 13.1 bcf.
- The dollar index on Wednesday fell -0.056 (-0.06%)
- EUR as the strongest of the major currencies, the CAD was the weakest.
- February gold (GCG2) closed up +10.50 (+0.58%)
- March silver (SIH22) closed up +0.114 (+0.49%).
- Dow industrial average, -392.54 points or -1.07% at 36407.12. Today the Dow reached a new all-time high at 36952.65, but then sold off after the FOMC meeting minutes.
- S&P index -92.94 points or -1.94% at 4700.59 after reaching a new all-time high just yesterday at 4818.62
- NASDAQ index -522.53 points or -3.34% 15100.18 now down nearly 7% from its all-time high
- Russell 2000 fell to 2,194.00 -3.30% -74.87 Today
- NYSE Adv 1670 Dec 1614 Vol 950.3 mln
- Nasdaq Adv 1857 Dec 2637 Vol 5.0 bln
- Ark of the Covenant not as it appears #ARK ETF $ARKK 86.11 ▼ 6.58 (7.10%) $ARKG 56.32 ▼ 3.93 (6.52%) $ARKX 18.25 ▼ 0.58 (3.11%) $ARKF 36.56 ▼ 2.71 (6.90%) $ARKW 108.71 ▼ 7.44 (6.41%)
- Apple 174.92▼ 4.78 (2.66%)
- The obsession of Apple hitting 3 trillion market at $182.86 was achieved (182.94 high)
- Bitcoin weaker at 43534 after breaking the channel
- German DAX, +0.7%
- France’s CAC, +0.9%
- UK’s FTSE 100 +0.2%
- Spain’s Ibex unchanged
- Italy’s FTSE MIB, +0.7%
Cboe Daily Market Ratios:
S&P 500 sector watch:
- 11 of the 11 S&P 500 sectors closed lower
- Real estate (-3.2%), information technology (-3.1%), and communication services (-2.9%) hit hardest
- Consumer staples (-0.03%), utilities (-0.1%), energy (-0.1%), and materials (-0.1%) sectors closed fractionally lower amid increased selling pressure into the close.
Markets YTD
- Dow Jones Industrial Average +0.2% YTD
- S&P 500 -1.4% YTD
- Russell 2000 -2.3% YTD
- Nasdaq Composite -3.5% YTD
Bonds
- In the Treasury market the 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, with growing expectations for a run-up to 2.00%.
- CME FedWatch Tool shows the probability for a rate hike in March increased to 67.8% today, versus 59.7% yesterday and 27.1% one month ago.
News Highlights
- ADP estimated that 807,000 jobs were added to private sector payrolls in December (consensus 425,000), up from a downwardly revised 505,000 (from 534,000) in November.
- The preliminary IHS Markit Services PMI for December decreased to 57.6 from 58.0 in the final reading for November.
- The MBA Mortgage Applications Index decreased 5.6% on a weekly basis.
- Fed Minutes saw a slide with the paragraph “Discussion of Policy Normalization Considerations,” which noted that participants judged that the appropriate pace of a balance sheet runoff would likely be faster than it was during the previous normalization episode. The reasoning not only includes the fact that the balance sheet is much larger, but also because the current economic outlook is much stronger, with higher inflation and a tighter labor market compared to last time.
- Participants noted that the Fed would likely not wait two years to begin normalizing the balance sheet like it did last time. It would commence sometime after the first rate hike.
Around The Barrel – Gasoline and Distillate Builds for Year End Crude Tax Assessment
Welcome to 2022, WTI Oil futures have rallied after OPEC+ holds the status quo. We had Gasoline builds on expected year-end inventory release for tax assessment on December 31 on crude barrels. Last week EIA reported US Crude last Week crude drew -2144Kbbl (incl +2577kbbl build at Cushing). Gasoline stocks drew +10128kbbl. Utilization fell +.1% to 89.7%. Production +200k to 11,800 kbpd.
Into The Vortex – Natural Gas Outlook – TRADERS COMMUNITY
Into New Year and U.S. domestic natural gas demand for heating has weakened Atmospheric G2 models said that warmer-than-normal temperatures in the eastern U.S. should continue to curb heating demand. Last week EIA reported a draw of -136 Bcf of working gas in storage lower than expected. With the global energy crisis LNG exports continue to grow but we balance supply shortages with deliverability.
Looking ahead:
ISM Non-Manufacturing Index for December, the weekly Initial and Continuing Claims report, the Trade Balance for November, Factory Orders for November and EIA Natural gas inventories on Thursday.
Trust you all had a great day, sleep well and get your trading plan sorted.
Any questions please feel free to ask them below. Trade Smart!