Market Wrap – Bull Run Extends for Three Days into Quad Witching March 17, 2022

Since the so-called death cross in the NASDAQ stocks, with maximum pessimism on Monday on the confluence of war, China covid and Fed fears. Since then, stocks have seen an extended rebound rally to a third straight day. Oil prices recaptured $104 as war drums with Russia and the Ukraine. In the Nattyverse futures March Nymex natural gas on Thursday headed back to $5. With today’s rally the S&P 500 finished 5.7% above Monday’s close, Nasdaq Composite up 8.2% and 6.4% in the Russell 2000. Over the same three-day period, the CBOE Volatility Index (25.67, -1.00, -3.8%) has dropped 19%. 

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

  • April WTI crude oil (CLJ22) futures settled higher by $8.01 (+8.4%) to $103.43/barrel.
  • 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 natural gas (NGJ22) settled up a second day, jumping 24.2 cents day/day and settled at $4.990/MMBtu. May gained 23.7 cents to $5.021.
  • Senior meteorologist Michael Shuman of IBM’s The Weather Company forecast a springtime pattern across North America for most of what’s left of March.   “The undulating warmth will support a prolonged stretch of much lower-than-average heating degree days that will help skew the monthly demand to the lower side of normal,” he said.
  • “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 Thursday rose +3.4% w/w to 13 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 fell 0.8% to 98.34.  
  • Gold futures settled $34.00 higher (+1.8%) to $1,943.20/oz, with weakness in the dollar following yesterday’s Fed rate hike.
  • May silver (SIK22) is up +0.900 (+3.64%). 
  • CME Bitcoin Futures Settle MAR 22 -35 40885.0

Stocks

For The Day

  • Dow 34480.76 +417.66 (1.23%)
  • Nasdaq 13614.78 +178.23 (1.33%)
  • SP 500 4411.67 +53.81 (1.23%)
  • The 1.23% gain in the S&P 500 today marks the best three-day gain since November 2020.
  • NYSE Adv 2525 Dec 667 Vol 1.1 bln
  • Nasdaq Adv 3280 Dec 1103 Vol 5.5 bln

S&P 500 sector watch:

  • 11 of the 11 S&P 500 sectors closed higher
  • Lowest 0.5% (utilities) to Highest 3.5% (energy).
  • Advancing issues outpaced declining issues by roughly a 4:1 margin at the NYSE and a 3:1 margin at the Nasdaq. 

Key Earnings Reviews


  • Accenture (ACN 340.00, +15.09): +4.6% after beating top and bottom-line estimates, guiding revenue for Q3 and FY22 revenue above consensus, and raising its quarterly dividend by 10%.
  • Williams-Sonoma (WSM 164.00, +11.55): +7.6% after beating EPS estimates, authorizing $1.5 billion for share buybacks, and raising its quarterly dividend by 10%. WSM provided FY23 revenue growth guidance in-line with company expectations.
  • Dollar General (DG 220.00, +7.51): +3.5% after guiding FY23 EPS and revenue above consensus, outweighing its below-consensus Q1 EPS guidance.
  • Lennar (LEN 89.30, +0.79): +0.9% after beating EPS estimates and authorizing $2.0 billion for share repurchases.
  • Warby Parker (WRB Y20.29, -6.53): -22.4% after guiding FY22 revenue below consensus. WRBY beat EPS estimates.

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

  • German DAX, -0.3%
  • France’s CAC, +0.5%
  • UK’s FTSE 100 +1.3%
  • Spain’s Ibex +0.1%
  • Italy’s FTSE MIB -0.8%

Asia

  • Japan’s Nikkei: +3.5%
  • Hong Kong’s Hang Seng: +7.0%
  • China’s Shanghai Composite: +1.4%
  • India’s Sensex: +1.8%
  • South Korea’s Kospi: +1.3%
  • Australia’s ASX All Ordinaries: +1.2%

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 yields in the 10-yr Treasury note yield settled unchanged at 2.19% after dipping below 2.11% overnight. The ability for the 10-yr yield to move higher, undoing some of yesterday’s curve-flattening activity, seemed to alleviate some underlying growth concerns. The 2-yr yield fell four basis points to 1.94%. 

  • 2-yr: -4 bps to 1.94%
  • 3-yr: -1 bp to 2.15%
  • 5-yr: -3 bps to 2.17%
  • 10-yr: UNCH at 2.19%
  • 30-yr: +3 bps to 2.49%

Solid U.S. 30-year Treasury Bond Auction with High Yield of 2.375% Follows Screeching CPI – TRADERS COMMUNITY

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 housing starts increased 6.8% month-over-month to a seasonally adjusted annual rate of 1.769 million (Briefing.com consensus 1.700 million) and building permits slipped 1.9% to a seasonally adjusted annual rate of 1.859 million (Briefing.com consensus 1.860 million).The key takeaway from the report was that single-family units (+5.7%) drove the strength in starts, yet a 0.5% decline in permits for single units (a leading indicator) tempered some of the enthusiasm for the otherwise encouraging February number.
  • Initial jobless claims for the week ending March 12 decreased by 15,000 to 214,000 (Briefing.com consensus 224,000) and continuing claims for the week ending March 5 decreased by 71,000 to 1.419 million, hitting their lowest level since February 21, 1970.The key takeaway from the report is the understanding that the latest week is the week in which the survey for the March employment report was conducted. With the low level of initial claims, expectations for a strong pickup in job growth — and a continuation of the strong labor market the Fed chair was discussing — will remain high.
  • Total industrial production increased 0.5% month-over-month in February (Briefing.com consensus 0.5%) following an unrevised 1.4% increase in January. The capacity utilization rate rose to 77.6% (Briefing.com consensus 77.9%) from a downwardly revised 77.3% (from 77.6%) in January. The key takeaway from the report is that industrial production is being held back by the output of motor vehicles and parts, which stems from ongoing supply shortages. The output of motor vehicles and parts declined 3.5% in February.
  • The Philadelphia Fed Index for March increased to 27.4 (Briefing.com consensus 14.0) from 16.0 in February.

Europe

  • The Bank of England raised its bank rate by 25 bps to 0.75%, as expected.
  • Bank of France Governor Villeroy de Galhau said that he does not see the risk of a recession.
  • Germany’s chemical industry association said that it no longer sees potential for growth in the industry this year.
  • Eurozone’s February CPI was up 0.9% m/m, as expected (last 0.3%) and up 5.9% yr/yr (expected 5.8%; last 5.8%).
  • Spain’s January trade deficit reached EUR6.10 bln (last deficit of EUR5.30 bln).
  • Swiss February trade surplus reached CHF5.953 bln (last surplus of CHF3.066 bln).

Asia

  • Hong Kong’s Monetary Authority raised its base rate by 25 bps to 0.75%, as expected.
  • Xinhua reported that China is not planning to expand property tax reform this year.
  • The Bank of Japan and the Reserve Bank of Australia extended their bilateral currency swap agreement for three years.
  • Japan’s January Core Machinery Orders fell 2.0% m/m (expected -2.2%; last 3.1%) but were up 5.1% yr/yr (expected 8.1%; last 5.1%).
  • Australia’s February employment increased by 77,400 (expected 37,000; last 12,900) and full employment increased by 121,900 (last -17,000). February Unemployment Rate fell to 4.0% from 4.2% (expected 4.1%) and Participation Rate rose to 66.4% from 66.2% (expected 66.3%).
  • Singapore’s February trade surplus reached $8.325 bln (last surplus of $5.068 bln). February non-oil exports fell 2.8% m/m (expected -0.3%; last 5.0%).

Looking ahead:

Monday: 

  • India, February consumer price index (CPI) data,
  • UK, Office for National Statistics annual review of the “shopping basket” of items making up the suite of consumer price inflation indices

Tuesday: 

  • Canada, January manufacturing data
  • China, monthly retail sales figures
  • EU, January industrial production data France, February inflation rate Germany, research group ZEW economic sentiment survey
  • India, trade statistics
  • Japan, balance of trade data
  • Opec monthly oil market report
  • UK, March payroll employment figures plus February insolvency numbers
  • US: February labour statistics US February PPI (prior 1.0%), Core PPI (prior 0.8%), and March Empire State Manufacturing Survey (prior 3.1) at 8:30 ET

Wednesday: 

  • Canada, February CPI data
  • International Energy Agency monthly oil market report
  • Italy, February CPI data
  • Japan, January industrial production figures
  • US: Weekly MBA Mortgage Index (prior 8.5%) at 7:00 ET; February Retail Sales (prior 3.8%), Retail Sales ex-auto (prior 3.3%), and February Import/Export Prices at 8:30 ET; January Business Inventories (prior 2.1%) and March NAHB Housing Market Index (prior 82) at 10:00 ET; weekly crude oil inventories (prior -1.86 mln) at 10:30 ET; and March FOMC Rate Decision (prior 0-0.25%) at 14:00 ET

Thursday:

  • St Patrick’s day: Irish taoiseach Michael Martin will hold the annual shamrock ceremony with US president Joe Biden in Washington
  • Norway, 23 Nato members plus Finland and Sweden begin winter exercises in northern Norway in the Cold Response 2022 event
  • Australia, Reserve Bank of Australia’s quarterly bulletin
  • EU, February inflation data
  • Japan, two-day Bank of Japan monetary policy committee meeting begins plus February CPI data
  • Spain, January trade balance figures
  • UK, Bank of England’s monetary policy committee vote on interest rates
  • US: February Housing Starts (prior 1.638 mln), Building Permits (prior 1.899 mln), weekly Initial Claims (prior 227,000), Continuing Claims (prior 1.494 mln), and March Philadelphia Fed Survey (prior 16.0) at 8:30 ET; February Industrial Production (prior 1.4%) and Capacity Utilization (prior 77.6%) at 9:15 ET; and weekly natural gas inventories (prior -124 bcf) at 10:30 ET

Friday: 

  • Holi, the Hindu festival of colors
  • Sikh festival of Hola Mahalla begins
  • Canada, January retail trade figures EU, January trade figures Italy, January trade balance figures UK, February retail sales figures
  • US: Quadruple Witching Day, when stock index futures, stock index options, stock options and single-stock futures expire February Existing Home Sales (prior 6.50 mln) 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!