Market Wrap – Black Gold, Texas Tea March 4, 2002

While oil soared to highs above 2008 levels and energy stocks soared the major US indices ended lower with the NASDAQ leading the way. For the week, the Dow industrial average is down for the fourth week in a row while the NASDAQ and S&P are down for the third week in the last four. Struggling with the markets? please join us we went live @youtube in 15 to go thru one of our best weeks.

  • Part A Energy #oil #natgas $ES_F #Gold $AA $OXY $XOM $APA $INDO $FCX $PTEN $BTU
  • Part B Dribbler Shorts $JMIA $OPEN $RISE $PLTR $FUBU $PATH $TASK

As always we look at the indices, Oil, Gold, Copper, Wheat, BTC, ETH, Natgas in the podcast. We talk through to today’s action and where to now … This is a high-risk trading season. …

Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share

Live on YouTube

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 & @velocityradar 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.

We look at the indices, Gold, Copper, BTC, ETH, Natgas, and oil in the podcast. De-risking may threaten progress that has been achieved on since the COVID bailout. It also has the potential to reverse some of the progress made in protecting downside risk if banks close or restrict access to money.


Market Closes

Energy

  • April WTI crude oil (CLJ22) futures settled at $115.68 per barrel. That’s the highest close since September 2008. The high price$115.94, low price today $107.29.
  • For the week, the price is up over 25%.
  • The high price today was the highest level since 2008. Since a swing low on December 6 at $62.46, the price has risen over 92% to the high price of $116.57. The swing low from the May 2, 2011, high at $114.79 was broken. The highest level since the week of September 8, 2008. The highest in 2008 was $147.27.
  • April RBOB gasoline (RBJ22) closed up +25.96 (+7.90%).
  • April Nymex natural gas (NGJ22) up 29.4 cents on Friday, it rallied during the week and settled at $5.016/MMBtu to close Friday, up 12% from the prior week’s finish.
  • NatGasWeather expected “very light demand” over the weekend and into Monday “as warmer temperatures expand” to include almost all of the Lower 48.
  • The weekend warmth is expected to mark the first of four distinct periods of national demand over the next two weeks, with near-normal demand by late in the coming week, strong demand March 12-15, then back to light national demand March 16-18, NatGasWeather said.
  • Looking ahead to next week’s storage report, The Desk’s online energy platform Enelyst looked for a draw between roughly 115 Bcf and 130 Bcf.
  • “The energy market fallout from Russia’s egregious invasion in Ukraine continues,” said EBW Analytics Group’s Eli Rubin, senior analyst. Traders “are pulling back from Russian supplies, with estimates of 2-3 million b/d of oil and product supply unable to find buyers as traders fear official new sanctions, desire to avoid being seen financing Russia, and freight and insurance costs spike.”
  • BNEF data showed gas flows to U.S. export terminals Friday rose +3.6% w/w to 12.5 bcf.   On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.

Commodities and FX

  • The dollar index (DXY00) on Thursday rose +0.407 (+0.42%).
  • Gold futures settled $30.70 higher (+1.6%) to $1,966.60/oz as investors flocked to haven assets following Russia’s seizure of Europe’s largest nuclear power plant in Ukraine.
  • May silver (SIK22) closed up +0.577 (+2.29%)
  • Bitcoin CME March 22 -2535 to 39545.0
  • Russia reportedly recommended that fertilizer producers halt their exports. Elsewhere, Hungary will reportedly ban all grain exports to ensure a sufficient domestic supply. The ongoing uncertainty drove corn futures to a record high while wheat and soybean futures are not far from reaching new records themselves.
  • Wheat futures up limit again to 1209 cents (or $12.09)
  • Corn futures up 4.2 cents that 752 cents or $7.52)
  • Soybeans down $0.11 at 1656 cents or $16.56

Stocks

For The Day

  • Dow industrial average fell -179.88 points or -0.53% at 33614.80. The Dow all-time high close at 36952.65. For the week, Dow fell -1.30%
  • S&P index fell -34.62 points or -0.79% at 4328.88 The S&P all-time high close at 4818.62. The S&P is closed 10% from its all-time high. For the week, -1.28%
  • NASDAQ index fell -224.49 points or -1.66% at 13313.45. Nasdaq closed 18% from it’s all time high. For the week, fell -2.78%
  • Russell 2000 fell -31.50 points or -1.55% at 2000.89. For the week, fell -1.90%
  • CBOE Volatility Index fell 30.48▼ 0.26 (0.85%)
  • NYSE Adv 1350 Dec 1843 Vol 1.1 bln
  • Nasdaq Adv 1550 Dec 2793 Vol 5.0 bln

S&P 500 sector watch:

  • 6 of the 11 S&P 500 sectors closed lower
  • S&P 500 utilities (+2.2%), real estate (+0.8%), health care (+0.5%), and consumer staples (+0.1%) Occidental Petro (OXY 55.68, +7.93, +16.61%) is today’s top performer.
  • Financials (-2.0%) and information technology (-1.8%) sectors at the bottom of the pack. 

Key Earnings Reviews

  • Broadcom (AVGO 595.50, +16.90): +2.9% after beating top and bottom-line estimates and guiding fiscal Q2 revenue above consensus.
  • Costco (COST 523.50, -9.55): -1.8% despite beating top and bottom-line estimates. On a related note, Telsey Advisory Group raised its COST price target to $615 from $610.
  • Gap (GPS 15.20, +0.95): +6.7% after beating EPS estimates and guiding FY23 EPS above consensus.
  • Marvell (MRVL 63.37, -1.83): -2.8% despite beating top and bottom-line estimates and guiding Q1 revenue mostly above consensus. On a related note, MRVL was downgraded to Hold from Buy at Summit Insights.


US Markets YTD

  • Dow Jones Industrial Average -7.5% YTD
  • S&P 500 -9.2% YTD
  • Russell 2000 -10.9% YTD
  • Nasdaq Composite -14.9% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • STOXX Europe 600: -3.0% (-6.5% week-to-date)
  • Germany’s DAX: -2.4% (-9.1% week-to-date)
  • U.K.’s FTSE 100: -3.2% (-6.4% week-to-date)
  • France’s CAC 40: -3.7% (-9.1% week-to-date)
  • Italy’s FTSE MIB: -5.0% (-11.7% week-to-date)
  • Spain’s IBEX 35: -2.9% (-8.3% week-to-date)

Asia

  • Japan’s Nikkei: -2.2% (-1.9% for the week)
  • Hong Kong’s Hang Seng: -2.5% (-3.8% for the week)
  • China’s Shanghai Composite: -1.0% (-0.1% for the week)
  • India’s Sensex: -1.4% (-2.7% for the week)
  • South Korea’s Kospi: -1.2% (+1.4% for the week)
  • Australia’s ASX All Ordinaries: -0.7% (+1.7% for the week)

Recall Last Month: 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 a volatile week with strong gains across the curve and the 10-yr note pacing the Friday rally. 10-yr yield back below its 50-day moving average (1.795%) while the 5-yr yield and the 30-yr yield ended just above 50-day moving averages of their own. The 2s10s spread tightened by 17 bps to 23 bps over the course of the week.

  • 2-yr: -5 bps to 1.49% (-10 bps for the week)
  • 3-yr: -8 bps to 1.60% (-17 bps for the week)
  • 5-yr: -11 bps to 1.63% (-26 bps for the week)
  • 10-yr: -12 bps to 1.72% (-27 bps for the week)
  • 30-yr: -8 bps to 2.15% (-15 bps for the week)
  • The fed funds futures market March FOMC meeting implied likelihood of a 50-bps hike fell to 6.6% from 24.0% on Friday and 65.7% two weeks ago.

The probability for a half-point hike in March decreased to 50.2% from 93.8% yesterday, according to the CME FedWatch Tool. 

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

February nonfarm payrolls increased by 678,000 (consensus 400,000). The 3-month average for total nonfarm payrolls rose to 582,000 from 572,000. January nonfarm payrolls revised to 481,000 from 467,000. December nonfarm payrolls revised to 588,000 from 510,000.

Europe

  • Eurozone’s January Retail Sales 0.2% m/m (expected 1.5%; last -2.7%); 7.8% yr/yr (expected 9.5%; last 2.1%)
  • Germany’s February IHS Markit Construction PMI 54.9 (last 54.4). January trade surplus EUR9.40 bln (expected surplus of EUR7.10 bln; last surplus of EUR8.1 bln). January Imports -4.2% m/m (last 4.0%) and Exports -2.8% m/m (last 1.2%)
  • U.K.’s February Construction PMI 59.1 (expected 54.3; last 56.3)
  • France’s January Industrial Production 1.6% m/m (expected 0.5%; last -0.1%)
  • Italy’s Q4 GDP 0.6% qtr/qtr, as expected (last 2.6%); 6.2% yr/yr (expected 6.4%; last 3.9%)

Asia

  • Japan’s January Unemployment Rate 2.8% (expected 2.7%; last 2.7%)
  • South Korea’s February CPI 0.6% m/m (expected 0.4%; last 0.6%); 3.7% yr/yr (expected 3.5%; last 3.6%)
  • India’s February Nikkei Services PMI 51.8 (expected 53.0; last 51.5)
  • Australia’s January Retail Sales 1.8% m/m, as expected (last -4.4%)
  • Singapore’s January Retail Sales -2.5% m/m (last 1.3%); 11.8% yr/yr (last 6.7%)
  • Hong Kong’s January Retail Sales 4.1% yr/yr (last 6.2%)

Reserve Bank of New Zealand Raised Rate 25 Basis Points as Expected, Will Not Reinvest QE Proceeds – TRADERS COMMUNITY

Looking ahead:

  • Monday: January Consumer Credit (prior $18.9 bln) at 15:00 ET
  • Tuesday: January Trade Balance (prior -$80.70 bln) and January Wholesale Inventories at 8:30 ET; and $48 bln 3-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -0.7%) at 7:00 ET; weekly crude oil inventories (prior -2.597 mln) at 10:30 ET; and $34 bln 10-yr Treasury note reopening results at 13:00 ET
  • Thursday: Weekly Initial Claims (prior 215,000), Continuing Claims (prior 1.476 mln), February CPI (prior 0.6%), and February Core CPI (prior 0.6%) at 8:30 ET; weekly natural gas inventories (prior -139 bcf) at 10:30 ET; $20 bln 30-yr Treasury bond reopening results at 13:00 ET; and February Treasury Budget (prior $118.70 bln) at 14:00 ET
  • Friday: Preliminary University of Michigan Consumer Sentiment survey (prior 62.8) 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!