The selling continued to heat up as key levels were busted. The S&P 500 broke and closed under the Weekly Kijun falling -2.8% down 136 points to 4254 and down -2.8% for the week. The Nasdaq fell -2.6% and on the week Nasdaq -3.8%. The small cap Russell 2000 fell -2.8%, -3.1% for the week. Natural gas also joined in on the downside again. Natural gas prices reversed sharply after touching a high not seen since November 2008of $8.065 Monday, the May contract settled Friday at $6.534 in the benchmark Henry Hub contract.
We look at the indices, $FAZ $VIX $AAPL $NFLX $SNAP $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through to today’s action and where to now …
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
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. We discuss trading psychology, risk management and trader development in today’s markets. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 @MetaJohnny1 plot out 2022.
Around the table today was packed with the Fed, geopolitics, domestic political influence and distortions, reading sentiment, patterns and order flow. After hours earnings and chart pattern review. This is a high-risk market.
- WTI crude futures settled lower by $1.79 (-1.7%) to $102.00/barrel.
- Brent Crude Futures 105.72 -0.43 -0.41
- Natural Gas Futures 6.465 -0.492 -7.07
- Unleaded Gasoline Futures 3.2817 -0.0569 -1.70
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Rystad Energy said the war-induced uncertainty is likely to continue to impact gas prices.
- “The gas market remains highly volatile, and news driven,” said Rystad analyst Fabian Rønningen. This week, in particular, “the market remains anxious for clarity on rules governing ruble payments for Russian gas supplies.”
- BNEF data showed gas flows to U.S. export terminals Tuesday rose by +10.7% w/w to 12.8 bcf. In March gas flows to U.S. export terminals rose to a record 13.77 bcf.
Commodities and FX
- The U.S. Dollar Index closed out the week at the highest since the very peak of the pandemic scare in March 2020. Notably, nearly all trades closed at the extremes of the week, including AUD, NZD, GBP and CAD.
- Gold Futures 1932.50 -15.70 -0.81
- Silver Futures 24.190 -0.431 -1.75
- Copper Futures 4.5835 -0.1205 -2.56
- Corn Futures 787.75 -7.50 -0.94
- Wheat Futures 1073.50 -3.00 -0.28
- Bloomberg Commodity Index 129.03 -2.27 -1.73
US Indices & S&P 500 sector watch:
- DJ 33811.40 -981.36 -2.82
- Nasdaq Composite 12839.29 -335.36 -2.55
- S&P 500 4271.78 -121.88 -2.77
- Russell 2000 1940.66 -50.80 -2.55
- NYSE Composite 16056.87 -442.47 -2.68
- CBOE Volatility 28.21 5.53 24.38
- NYSE Adv 487 Dec 2722 Vol 1.0 bln
- Nasdaq Adv 1127 Dec 3098 Vol 4.4 bln
- All 11 S&P 500 sectors closed lower with -1.6% (consumer staples) to -3.7% (materials), and all 30 Dow components closed lower.
- The S&P 500 fell further below its descending 50-day moving average (4407).
Key After Hours
US Markets YTD
- Dow Jones Industrial Average -7.0% YTD
- S&P 500 -10.4% YTD
- Russell 2000 -13.6% YTD
- Nasdaq Composite -17.9% YTD
Cboe Daily Market Ratios:
- UK: FTSE 100 7521.68 -106.27 -1.39
- Germany: DAX 14142.09 -360.32 -2.48
- France: CAC 40 6581.42 -133.68 -1.99
- Italy: FTSE MIB 24279.63 -525.99 -2.12
- Spain: IBEX 35 8652.30 -162.30 -1.84
- Stoxx Europe 600 453.31 -8.26 -1.79
- Switzerland: Swiss Market 12258.33 -43.00 -0.35
- Global Dow 3932.45 -95.88 -2.38
- Japan Nikkei -1.6% (UNCH for week)
- Hong Kong HangSeng -0.2% (-4.1%)
- China Shanghai Comp+0.2% (-3.9%)
- India Sensex -1.2% (-2.0%)
- South Korea Kospi -0.9% (+0.3%)
- Australia ASX All Ordinaries -1.5% (-0.7%)
Recall in January: JP Morgan quant maestro Marko Kolanovic was out with a comment near lows that didn’t go unnoticed.
“Near term we recommend buying the dip on US indices given oversold conditions… though medium term we favor EM/China/Europe on a regional basis on improving activity and easing headwinds, and the UK on valuation.”Marko Kolanovic Jan 10 2022
- We stay positive on equities and expect omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll,
- As this wave fades, it will likely mark the end of the pandemic
- omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity
- signs of supply constraints potentially passing their worst point
Recall back in October he said to buy the dip because fears of higher yields were overdone adding the market could absorb higher yields. “We don’t expect a broad market selloff unless yields were to rise above 250-300 bps (US 10y), which we don’t foresee in the near term,” From there the S&P 500 rose 11.5%.
Perhaps this time it’s’ different but nevertheless the algorithms liked it that day but from then ……… not so much
U.S. Treasuries finished with the fed-funds-sensitive 2-yr yield up three basis points to 2.72% while the growth-sensitive 10-yr yield decreased one basis point to 2.91% after hitting 2.97% Thursday evening.
- 2-yr: +3 bps to 2.72% (+27 bps for the week)
- 3-yr: UNCH at 2.89% (+21 bps for the week)
- 5-yr: -3 bps to 2.95% (+16 bps for the week)
- 10-yr: -1 bp to 2.91% (+8 bps for the week)
- 30-yr: +1 bp to 2.94% (+2 bps for the week)
Most of us are familiar with QE but what is QT? When the Fed reduces its balance sheet it is known as quantitative tightening, the flipside of quantitative easing. The US Federal Reserve at its December FOMC put the world on notice that tighter financial conditions are ahead. What does it mean? The possible Bifurcations would make Mandelbrot wince.
Where did it all start?
The Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last month’s FOMC and the release of Minutes which sent US stock markets sharply lower. That day 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%.
- Manufacturing PMI rose to 59.7 in the flash reading for April from 58.8 in the final March reading.
- Services PMI fell to 54.7 in the flash reading for April from 58.0 in the final March reading.
- Schlumberger Well Construction and Reservoir Performance Lead Earnings With Higher Oil and Gas Price Rises – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Storage Grew Larger Than Expected 53Bcf – TRADERS COMMUNITY
- Tesla Delivers Record Earnings Despite Global Supply Chain Headwinds – TRADERS COMMUNITY
- Around The Barrel – US Crude Oil Draws -8.02 Billion Barrels Reverses Last Week’s +9.38Bbbls Build – TRADERS COMMUNITY
- US Mortgage Applications Fall for Sixth Straight Week as Mortgage Rates Surge to Highest Since 2010 – TRADERS COMMUNITY.
- American Express (AXP 183.85, -1.89): -1.0% despite beating EPS estimates and reaffirming full-year guidance.
- Verizon (VZ 54.15, -0.86): -1.6% after saying it expects FY22 EPS to be at the lower end of guidance range. Q1 results were in-line with expectations.
- Snap (SNAP 29.53, +0.11): +0.4% after missing EPS estimates and guiding Q2 revenue below consensus. DAUs grew 18% year-over-year.
- Gap (GPS 11.97, -2.32): -16.2% after lowering its fiscal Q1 revenue guidance due to macro-economic dynamics and execution challenges at the Old Navy brand. Old Navy CEO Nancy Green is stepping down.
- Kimberly-Clark (KMB 133.30, +5.20): +4.1% after beating top and bottom-line estimates and reaffirming its FY22 EPS guidance.
- HCA (HCA 220.09, -49.36, -18.3%): weakest performer in the sector, falling from a record high past its 50-day (255.68) and 200-day (248.17) moving averages to its lowest level since late January. Company missed Q1 EPS expectations on above-consensus revenue and lowered its guidance for FY22.
- Intuitive Surgical (ISRG 258.90, -35.67, -12.1%): falling toward its January low (254.20) despite beating Q1 expectations and increasing its procedure growth outlook for FY22.
- Universal Health (UHS 136.19, -18.30, -11.9%): falling past its 50-day (144.85) and 200-day (139.67) moving averages to a two-month low.
- DaVita (DVA 112.61, -10.05, -8.2%): falling past its 200-day (115.13) and 50-day (114.56) moving averages to its lowest level in nearly three weeks.
- Stryker (SYK 254.66, -15.37, -5.7%): falling past its 200-day (263.12) and 50-day (261.20) moving averages to a level not seen since mid-March.
- Danaher (DHR 268.09, -10.15, -3.7%): falling to its lowest level since mid-March.
- Align Technology (ALGN 371.41, -12.22, -3.2%): falling to its lowest level since October 2020.
- Anthem (ANTM 508.69, -14.18, -2.7%): falling from a record high to its lowest level in nearly two weeks.
- Thermo Fisher (TMO 565.70, -14.73, -2.5%): falling to its 50-day moving average (565.68).
- Eli Lilly (LLY 283.61, -6.00, -2.1%): falling for the ninth consecutive day to its lowest level since mid-March.
- Cerner (CERN 93.74, +0.40, +0.4%): lone advancer in the sector, rising toward its record high from March (93.87).
- Germany lowered its 2022 growth forecast to 2.2% from 3.6%.
- Eurozone’s flash April Manufacturing PMI fell to 55.3 from 56.5 (expected 54.7) and flash Services PMI rose to 57.7 from 55.6 (expected 55.0). February Current Account surplus reached EUR20.80 bln (last surplus of EUR21.60 bln).
- Germany’s flash April Manufacturing PMI rose to 55.4 from 54.7 (expected 53.0) and flash Services PMI rose to 58.8 from 57.4 (expected 56.5).
- U.K.’s flash April Manufacturing PMI ticked up to 55.3 from 55.2 (expected 59.0) and flash Services PMI fell to 58.3 from 62.6 (expected 60.0). March Retail Sales were down 1.4% m/m (expected -0.3%; last -0.5%) but up 0.9% yr/yr (expected 2.8%; last 7.2%). March Core Retail Sales were down 1.1% m/m (expected -0.4%; last -0.9%) and down 0.6% yr/yr (expected 0.7%; last 4.7%).
- France’s flash April Manufacturing PMI rose to 55.4 from 54.7 (expected 53.0) and flash Services PMI rose to 58.8 from 57.4 (expected 56.5).
- About 60% of large businesses in Shanghai have resumed production.
- Japan’s Finance Minister Suzuki and Treasury Secretary Yellen reportedly discussed coordinated currency intervention during yesterday’s meeting.
- The Chinese government is reportedly encouraging large investors to buy domestic equities.
- Japan’s March National CPI was up 1.2% yr/yr (last 0.9%) and National Core CPI was up 0.8% yr/yr, as expected (last 0.6%). Flash April Manufacturing PMI fell to 53.4 from 54.1 and flash Services PMI rose to 50.5 from 49.4.
- Australia’s flash April Manufacturing PMI rose to 57.9 from 57.7 and flash Services PMI rose to 56.6 from 55.6.
- The Day Ahead:
- Monday: Nothing of note
- Tuesday: March Durable Orders (Briefing.com consensus 1.1%; prior -2.2%), Durable Orders ex-transportation (Briefing.com consensus 0.5%; prior -0.6%) at 8:30 ET; February FHFA Housing Price Index (prior 1.6%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 18.9%; prior 19.1%) at 9:00 ET; March New Home Sales (Briefing.com consensus 770,000; prior 772,000) and April Consumer Confidence (Briefing.com consensus 106.0; prior 107.2) at 10:00 ET; and $48 bln 2-yr Treasury note auction results at 13:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -5.0%) at 7:00 ET; March advance goods trade deficit (prior -$106.60 bln), March advance Retail Inventories (prior 1.1%), and March advance Wholesale Inventories (prior 2.1%) at 8:30 ET; March Pending Home Sales (Briefing.com consensus -1.5%; prior -4.1%) at 10:00 ET; weekly crude oil inventories (prior -8.02 mln) at 10:30 ET; and $49 bln 5-yr Treasury note auction results at 13:00 ET
- Thursday: Advance Q1 GDP (Briefing.com consensus 1.1%; prior 6.9%), advance Q1 GDP Deflator (Briefing.com consensus 7.3%; prior 7.1%), weekly Initial Claims (Briefing.com consensus 182,000; prior 184,000), and Continuing Claims (prior 1.417 mln) at 8:30 ET; weekly natural gas inventories (prior +53 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
- Friday: March Personal Income (Briefing.com consensus 0.4%; prior 0.5%), Personal Spending (Briefing.com consensus 0.6%; prior 0.2%), PCE Prices (prior 0.6%), core PCE Prices (Briefing.com consensus 0.3%; prior 0.4%), and Q1 Employment Cost Index (Briefing.com consensus 1.1%; prior 1.0%) at 8:30 ET; April Chicago PMI (Briefing.com consensus 62.0; prior 62.9) at 9:45 ET; and final April University of Michigan Consumer Sentiment Survey (Briefing.com consensus 65.7; prior 65.7) at 10:00 ET
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!