Market Wrap – Beware the Dribbler Ahead of Jobs Reports March 30, 2022

The rebound ran out of steam as the markets focus on inflation and jobs data. The pattern continued the dribbler favorites not performing, today’s Dribbler special short was $PATH down 27% on earnings. The S&P 500 fell 0.6%, Dow down 0.2%, Nasdaq Composite -1.2% and Russell 2000 (-2.0%) posted steeper declines while the Dow Jones Industrial Average declined just 0.2%.  Oil bounced after Russia refuted yesterday’s reports of a breakthrough in peace talks WTI at $107.67, +3.34, +3.2% aided by bullish inventory data out of the EIA also. 

We look at the indices, $AAPL, $RH $PATH $GME and others, 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

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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. 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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.


Market Closes

Energy

  • May WTI crude oil (CLK22) settled higher by $3.34 (+3.2%) to $107.67/barrel
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • May RBOB gasoline (RBK22) closed up by +10.97 (+3.45%).
  • The April Nymex gas futures contract settled Wednesday up +0.275 (+5.16%).
  • Options expiration on Monday and April contract’s expiry Tuesday. 
  • With weather demand waning, Bespoke looks for the first storage injection of the season on Thursday with the U.S. Energy Information Administration’s (EIA) next print. The report will cover the week ended March 25. Bespoke projected a storage increase of 22 Bcf, in line with expectations for a modest increase found by a preliminary Reuters poll.
  • BNEF data showed gas flows to U.S. export terminals Wednesday rose +2.5% y/y to 12.05 bcf.  On Saturday, gas flows to U.S. export terminals rose to a record 13.77 bcf.
  • Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended March 25 were unchanged at a 2-1/4 year high of 137 rigs.  Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).

Commodities and FX

  • The U.S. Dollar Index on Wednesday fell by -0.598 (-0.61%) to a 3-1/2 week low.  Strength in EUR/USD today weighed on the dollar as surging inflation pressures in Europe may prompt the ECB to raise interest rates sooner than expected, which is bullish for the euro.
  • Gold futures settled $21.00 higher (+1.1%) to $1,939/oz its first advance in four sessions amid lower yields
  • May silver (SIK22) closed up +0.377 +1.52%
  • CME Bitcoin Futures Settle MAR 22 -690 47240.0

Stocks

For The Day

  • Dow industrial average fell -65.40 points or -0.19% at 35228.82
  • S&P index fell -29.15 points or -0.63% at 4602.46
  • Nasdaq index fell -177.35 points or -1.21% at 14442.28
  • Russell 2000 fell -42.02 points or -1.97% at 2091.06
  • NYSE Adv 1388 Dec 1860 Vol 931.1 mln
  • Nasdaq Adv 1556 Dec 2877 Vol 5.4 bln

S&P 500 sector watch:

  • 7 of the 11 S&P 500 sectors closed lower
  • Energy (+1.2%), utilities (+0.8%), health care (+0.2%), and consumer staples (+0.2%) sectors closed in positive territory. 
  • S&P 500 information technology (-1.4%), consumer discretionary (-1.5%), and financials (-0.7%) sectors. 

Key After Hours

  • Datadog (DDOG) partners with Microsoft (MSFT) to add its monitoring and security capabilities within the Azure Cloud Adoption Framework… DDOG up 2.9%; no indication for MSFT
  • Expensify (EXFY) reports Q4 net loss per share of $(0.82) vs. breakeven year ago; revenue increased 56% yr/yr to $40.4 mln… EXFY down 16.6%
  • Flex (FLEX) reaffirms MarQ revenue and earnings guidance during today’s virtual investor day… FLEX down 0.9%
  • Masimo (MASI) issues product revenue guidance for Q1, reaffirms FY22 revenue guidance… MASI down 9.3%
  • UiPath (PATH) beats by $0.02, beats on revs; guides Q1 revs below consensus; guides FY23 revs below consensus… PATH down 26.8%

US Markets YTD

  • Dow Jones Industrial Average -3.8% YTD
  • S&P 500 -4.0% YTD
  • Russell 2000 -7.5% YTD
  • Nasdaq Composite -8.3% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • Europe Stoxx 600 fell 0.7%
  • UK’s FTSE +0.3% showed relative strength.
  • Germany’s DAX – 1.7%,
  • France’s CAC – 1.1%. 
  • Italy MIB -0.2%
  • Spain IBEX -0.7%

Asia

  • Japan’s Nikkei: -0.8%
  • Hong Kong’s Hang Seng: +1.4%
  • China’s Shanghai Composite: +2.0%
  • India’s Sensex: +1.3%
  • South Korea’s Kospi: +0.2%
  • Australia’s ASX All Ordinaries: +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

Bonds

U.S. Treasuries ended with gains across the curve, making for the third consecutive advance in the 5-yr note and longer tenors. The gains lifted the 10-yr note back to its starting level from Friday while the long bond approached its opening level from last week, where it remained into the close. Shorter tenors also rallied, with the 2-yr note giving into the buying pressure after a couple days of resistance. 

  • 2-yr: -2 bps to 2.33%
  • 3-yr: -5 bps to 2.49%
  • 5-yr: -4 bps to 2.45%
  • 10-yr: -4 bps to 2.36%
  • 30-yr: -4 bps to 2.48%

What You Need Know About Quantitative Tightening QT Bifurcations Explained – TRADERS COMMUNITY

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%.

News Highlights

USA

  • ADP Reports US Added 455K Jobs in March with Service Sector Adding 377K – TRADERS COMMUNITY Private payroll company ADP reported that US jobs grew 455,000 in March 2022. The US Labor Department will report It’s jobs report on Friday. February added upwardly revised 486K increase with market expectations adding 450K.
  • The third estimate of Q4 GDP showed a downward revision to 6.9% (Briefing.com consensus 7.1%) from the second estimate of 7.0%. The GDP Price Deflator was left unrevised at 7.1% (Briefing.com consensus 7.1%).
  • The key takeaway from the report is that the downward revision was owed to lower personal consumption expenditures and exports while private inventory investment was revised higher.
  • The weekly MBA Mortgage Applications Index fell 6.8% following an 8.1% decline in the prior week.

Pre-Market

  • Micron (MU 85.35, +3.30): +4.0% after beating top and bottom-line estimates and guiding Q3 EPS and revenue above consensus. 
  • lululemon athletica (LULU 369.34, +25.37): +7.4% after beating EPS estimates, issuing upside EPS/revenue guidance for fiscal Q1 and FY22, and authorizing a $1 billion stock repurchase program. 
  • Five Below (FIVE 166.00, -5.39): -3.1% after guiding EPS and revenue for Q1 and FY23 below consensus. 
  • Chewy (CHWY 43.85, -7.15): -14.0% after missing top and bottom-line estimates and guiding revenue for Q1 and FY23 below consensus. 

Europe

  • Eurozone’s March Business and Consumer Survey 108.5 (expected 109.0; last 113.9)
  • Italy’s January Industrial Sales 2.3% m/m (last -2.0%); 16.9% yr/yr (last 14.5%). February PPI 0.4% m/m (last 9.7%); 32.8% yr/yr (last 32.9%)
  • Spain’s March CPI 3.0% m/m (expected 1.3%; last 0.8%); 9.8% yr/yr (expected 8.0%; last 7.6%). March Business Confidence 5.3 (last 10.0)
  • Swiss March KOF Leading Indicators 99.7 (expected 100.8; last 105.3). March ZEW Expectations -27.8 (last 9.0)
  • European Central Bank President Lagarde said that inflation is expected to accelerate in the short term and that households have become more pessimistic. She also claimed that the economic consequences could be mitigated with the right response.
  • European Central Bank policymaker Kazimir said that the first rate hike could take place by the end of the year.
  • Germany has activated the early warning phase of its gas emergency law as the potential for shortages grows due to Germany’s refusal to pay for deliveries from Russia in rubles.

Asia

  • Japan’s February Retail Sales -0.8% yr/yr (expected -0.3%; last 1.1%)
  • New Zealand’s February Building Consents 10.5% m/m (last -8.7%). March ANZ Business Confidence -41.9 (last -51.8)
  • The Bank of Japan continued buying JGBs ahead of tomorrow’s end of the fiscal year.
  • China Securities Journal reported that Chinese companies have forecast an improvement in profits for Q1.
  • Developer Evergrande is reportedly planning another asset sale.
  • Australia is reportedly nearing a free trade agreement with India.
  • Australia is planning to sell AUD125 bln in debt during FY22/23, up from AUD100 bln sold a year ago.

Looking ahead:

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!