Markets continued to lift, driven higher by the mega-caps/growth stocks and Elon Musk as he disclosed a 9.2% passive stake in Twitter (TWTR). The broader market had lackluster day but many of the punter favorites and some of the dribbler stocks continued to show life as averagers continued. Oil popped back over $100, to $103.34, +3.80, +3.8%. Coal prices hit a 13-year high, exacerbating the inflation narrative that helped drive selling interest in the longer-dated part of the Treasury market.
We look at the indices, $AAPL, $AMZN, 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) futures settled higher by $3.80 (+3.8%) to $103.34/barrel.
- Off the high price of $129.44. The highest in 2008 was $147.27.
- May RBOB gasoline (RBK22) closed up by +4.46 (+1.41%).
- The May Nymex gas futures contract Monday closed down -0.008 (-0.14%).
- 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.”
- Atmospheric G-2 said Monday that below-normal temperatures are expected in the U.S. Northwest, and Southeast from April 9-13, and below-normal temperatures are expected for the Central U.S. and Interior West from April 14-18.
- BNEF data showed gas flows to U.S. export terminals Monday rose +4.8% y/y to 12.385 bcf. In March 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 Monday rose by +0.367 (+0.37%)
- Gold futures settled $10.30 higher (+0.5%) to $1,934.00/oz
- May silver (SIK22) closed down -0.064 (-0.26%).
- CME Bitcoin Futures Settle MAR 22 +815 46550.0
Stocks
For The Day
- Dow industrial average up 103.67 points or 0.3% at 34921.95
- S&P index up 36.76 points or 0.81% at 4582.63
- NASDAQ index up 271.06 points or 1.90% 14532.56
- Russell 2000 up 4.32 points or 0.21% at 2095.44
- NYSE Adv 1815 Dec 1479 Vol 917.4 mln
- Nasdaq Adv 2831 Dec 1798 Vol 4.5 bln
S&P 500 sector watch:
- 7 of the 11 S&P 500 sectors closed lower
- The S&P 500 information technology (+1.9%), consumer discretionary (+2.3%), and communication services (+2.3%) sectors, which contain the mega-caps, each rose about 2%. The energy sector (+0.1%) eked out a gain,
- Other sectors closed lower with utilities (-0.8%) finishing in last place.
Key After Hours
- Carnival plc (CUK): the one-week period of March 28 through April 3 was the busiest booking week in its history, showing a double-digit increase from the previous record seven-day booking total… CUK up 2.4%
- Castle Biosciences (CSTL) agrees to acquire AltheaDx for $65 mln, half of which will be paid in cash and half in common stock of CSTL; expects to close in 2Q22… CSTL up 4.4%
- Sphere 3D (ANY) and Gryphon Digital mutually agree to terminate merger agreement… ANY down 15.9%
- Supernus Pharma (SUPN) reaffirms FY22 guidance… SUPN up 2.1%
US Markets YTD
- Dow Jones Industrial Average -3.9% YTD
- S&P 500 -3.9% YTD
- Russell 2000 -6.7% YTD
- Nasdaq Composite -7.1% YTD
Cboe Daily Market Ratios:
Europe
- German DAX, +0.5%
- France’s CAC, +0.7%
- UK’s FTSE 100 +0.3%
- Spain’s Ibex, +0.2%
- Italy’s FTSE MIB, +0.1%
Asia
- Japan’s Nikkei: +0.3%
- Hong Kong’s Hang Seng: +2.1%
- China’s Shanghai Composite: closed for holiday
- India’s Sensex: +2.3%
- South Korea’s Kospi: +0.7%
- Australia’s ASX All Ordinaries: +0.4%.
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
The 10-yr yield increased three basis points to 2.41% while the 2-yr yield decreased one basis point to 2.42% — narrowing the inversion to one basis point.
- 2-yr: -1 bp to 2.42%
- 3-yr: -1 bp to 2.61%
- 5-yr: unch at 2.55%
- 10-yr: +3 bps to 2.41%
- 30-yr: +6 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
- Factory orders for manufactured goods declined 0.5% m/m in February (consensus -0.6%) following an upwardly revised 1.5% increase (from +1.4%) in January. Shipments of manufactured goods jumped 0.6% after increasing 1.4% in January.
- White House chief of staff Ron Klain says Russia’s invasion of Ukraine is “far from over.” He says there is a lot of evidence that Russia is simply redeploying troops to eastern Ukraine, according to ABC News
- White House mulling additional sanctions against Russia for civilian executions, according to the Washington Post
- Biden Administration announces several actions to improve and expand jobs in the trucking industry
- Senator Joe Manchin (D-WV) is against SEC rule on climate disclosures, according to CNBC
- House will introduce legislation thus week to provide $55 bln in support for restaurants, according to Roll Call
- Iran believes nuclear deal is getting close, according to Bloomberg
- President Biden speaking to reporters outside White House says he wants a war crimes trial for Russian President Putin and he wants more sanctions
- Lawmakers reach agreement on $10 bln in funding for COVID-19 vaccines, treatments, and testing for Americans; no money for international countries, according to Washington Post
- Coal prices in US top $100 per ton, highest in 13 years, according to Bloomberg
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
- Russian troops now appear to be withdrawing from areas around Kyiv, but attacks in other areas continue. Western officials cautioned that Russian movements away from Kyiv could just be repositioning for renewed attacks, according to the New York Times
- European Council President says Charles Michel says “Further EU sanctions & support are on their way”
- UK Prime Minister Boris Johnson issues statement on Russian war crimes against civilians in Irpin and Bucha
- Eurozone’s April Sentix Investor Confidence -18.0 (expected -9.2; prior -7.0)
- Germany’s February Exports +6.4% m/m (expected +1.5%; prior -2.8%) and Imports +4.5% (expected +1.4%; prior -4.2%)
- Spain’s Unemployment Change – 2.9K (prior -11.4K)
- Russia-Ukraine peace talks remain bogged down and reports this morning are highlighting claims that Russian troops have carried out civilian massacres in areas around Kyiv. Consequently, EU officials are reportedly planning to level more sanctions on Russia.
- The Eurozone’s Sentix Investor Confidence reading for April dropped to its lowest level (-18.0) since June 2020.
Asia
- Coronavirus cases continue to surge in China amid more lockdowns and additional Omicron sub variant, according to Bloomberg
- China will revise confidentiality rules for offshore listings, according to Reuters
- Japan’s March Monetary Base +7.9% yr/yr (prior +7.6%)
- Australia’s Retail Sales +1.8% m/m (expected +1.8%; prior +1.6%)
- India’s March Nikkei Manufacturing PMI 54.0 (expected 55.2; prior 54.9)
- Stocks in Hong Kong rallied amid reports that regulators are set to provide U.S. regulators more access to audit reports for Chinese companies.
- Hong Kong Chief Executive Carrie Lam said she will not seek a second term in office due to family considerations.
- China’s markets were closed for the Ching Ming Festival and will remain closed until Wednesday.
- COVID concerns persist, though, with all of Shanghai in some version of lockdown mode, pressuring China’s GDP growth outlook and supply chain logistics.
- Japanese officials calling more attention to the negative effects of a weaker yen. T
- The BOJ plans to increase purchases of 1-3 yr notes and decrease purchases of 3-5 yr and 10-25 yr securities.
- The Bank of Korea is planning to buy up to KRW2.0 trln of government securities on Tuesday.
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!