Market Wrap – Bonds Sell Off Sharply as Oil and Gas Extend Higher March 21, 2022

Stock markets held up well today after last week’s big rise, oil over $112 and U.S. Treasuries having a bad day at the office. Inflation worries got the selling going and then the selling accelerated when Fed Chair Powell told the NABE Conference that the Fed will be more aggressive if necessary to ensure a return to price stability, including hiking by 50 basis points at a meeting or meetings if necessary.

After hours NKE was the standout for earnings. Another Bear Market rally or something more after initially soaring on BTFD. We look at the indices, $MULN, 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

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 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

  • April WTI crude oil futures settled higher closing in on tomorrow’s expiration, up $7.42 to $112.12.
  • May prices up $6.50 to $109.53.
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • April RBOB gasoline (RBJ22) closed up +22.91 (+7.67%).
  • April Nymex gas futures contract settled at $4.900/MMBtu, up 3.7 cents. May rose 3.2 cents to $4.934.
  • Bespoke Weather Services said “The pattern exhibits a warm lean, especially in the near term, though some high-latitude blocking is projected in the medium range,” Bespoke said. This blocking “is not as significant this time of year, compared with back in winter, but is enough to take the pattern closer to normal, with more variability as we head into early April.”
  • “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 Monday rose +7.3% w/w to 13.54 bcf.  On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.

Commodities and FX

  • The U.S. Dollar Index rose +0.25%.  
  • Gold futures settled less than a dollar higher (flat) to $1,929.50/oz.
  • May silver (SIK22) closed up +0.226 (+0.90%)
  • CME Bitcoin Futures Settle MAR 22 -35 40885.0
  • Wheat futures closed up $0.55 and $11.19.
  • Corn futures rose $0.14 to $7.56

Stocks

For The Day

  • Dow industrial average -201.94 points or -0.58% at 34553
  • S&P index -1.94 points or -0.04% at 4461.12
  • NASDAQ index -55.37 points or -0.40% at 13838.47
  • Russell 2000 index fell -20.20 points or -0.97% at 2065.95
  • NYSEA Adv 1279 Dec 1956 Vol 1.10 bln
  • Nasdaq Adv 1733 Dec 2791 Vol 5.59 bln

S&P 500 sector watch:

  • 5 of the 11 S&P 500 sectors closed higher
  • Communication services (-0.7%) and consumer discretionary (-0.8%)
  • Commodity-linked energy (+3.8%) and materials (+0.9%) outperformed

Key Earnings Reviews


  • Boeing (BA 180.80, -12.03): -6.2% after a 737-800 jet crashed in China.
  • Nielsen Holdings (NLSN 20.21, -4.23): -17.3% after the company’s board rejected an unsolicited acquisition offer at $24.50/share.
  • Anaplan (PLAN 64.90, +14.31): +28.3% after agreeing to be acquired by Thoma Bravo for $66.00/share.
  • ImmunoGen (IMGN 4.37, -0.89): -16.9% despite releasing positive results from one of its trials.

US Markets YTD

  • Dow Jones Industrial Average -6.3% YTD
  • S&P 500 -8.6% YTD
  • Russell 2000 -9.6% YTD
  • Nasdaq Composite -14.1% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • STOXX Europe 600: +0.4%
  • Germany’s DAX: -0.6%
  • U.K.’s FTSE 100: +0.51%
  • France’s CAC 40: -0.57%
  • Italy’s FTSE MIB: +0.30%
  • Spain’s IBEX 35: -0.34%

Asia

  • Japan’s Nikkei: closed for holiday
  • Hong Kong’s Hang Seng: -0.9%
  • China’s Shanghai Composite: +0.1%
  • India’s Sensex: -1.0%
  • South Korea’s Kospi: -0.8%
  • Australia’s ASX All Ordinaries: -0.2%

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 had a bad day with rising oil prices and inflation worries then Fed Chair Powell told the NABE Conference that the Fed will be more aggressive if necessary to ensure a return to price stability, including hiking by 50 basis points at a meeting or meetings if necessary. Losses were significant across the curve as securities cleared resistance at their post-FOMC highs. The 10-yr note yield added 16 basis points to 2.31%. The 3-yr yield (2.34%), 5-yr yield (2.34%), and 7-yr yield (2.36%), however, pushed above the 10-yr yield. The 2s10s spread slipped a basis point to 18 basis points. The U.S. Dollar Index was up 0.3% to 98.50.

  • 2-yr: +17 bps to 2.13%
  • 3-yr: +19 bps to 2.34%
  • 5-yr: +20 bps to 2.34%
  • 10-yr: +16 bps to 2.31%
  • 30-yr: +11 bps to 2.53%

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

  • In remarks to NABE Conference, Fed Chair Powell says Fed will be more aggressive if necessary to ensure a return to price stability, including raising the fed funds rate by more than 25 basis points at a meeting or meetings and tightening beyond common measures of neutral and into a more restrictive stance if needed
  • Atlanta Fed President Raphael Bostic (not a voting FOMC member) says he penciled in six rate hikes for 2022 and two more for 2023

Europe

  • Germany’s February PPI +1.4% m/m (expected +1.7%; prior +2.2%) and +25.9% yr/yr (expected +26.2%; prior +25.0%)
  • The EU is considering an embargo on Russian oil
  • ECB member Knot has suggested that it is not unrealistic to expect a rate hike in 2022

Asia

  • The PBOC left the loan prime rates unchanged, although speculation persisted that China will ultimately provide monetary and fiscal stimulus to support the economy
  • Reuters reported that Australia announced a ban on alumina and aluminum ores exports to Russia.

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!