Market Wrap – Bulls Rampage as Oil Slides 20%, March 9, 2002

A big day of reversals, oil down 20% at one point and the US major indices snapped a 4-day losing streak that saw high to low declines for the major indices over those days showing. The S&P 500 rallied 2.6%, Nasdaq Composite gained 3.6%, the Russell 2000 gained 2.7%, and the Dow Jones Industrial Average gained 2.0% as buy-the-dip efforts were emboldened by the drop in oil prices ($108.88, -14.88, -12.0% at settle).

We look at the indices, $AAPL, $AMZN, $SUNW $CRWD $UUUU Gold, Copper, BTC, ETH, Natural gas and oil in the podcast. We also went through the Short Dribblers & Banks $FAZ with an added bonus of small energy floaters today.

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

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 & @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.


Market Closes

Energy

  • April WTI crude oil (CLJ22) futures settled exactly $15 lower today, or 12.1%, to $108.70. The largest percentage decline since November, when the omicron scares first hit.
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • Today: UAE saying it will push OPEC+ for more supply, Iraq saying it has some spare capacity if needed (they’re not meeting quotas now and added that supply is balanced), Zelensky saying he’s ready to compromise
  • April RBOB gasoline (RBJ22) April RBOB gasoline (RBJ22) closed down -38.88 (-10.56%) after yesterday having closed up +2.81 (+0.79%).
  • April Nymex natural gas (NGJ22) on Wednesday closed down by -0.001 (-0.02%).
  • Atmospheric G2 said today that above-normal temperatures are expected across most of the U.S. from March 14-18, and spring-like warmth will continue across most of the central and eastern parts of the U.S. from March 19-23.  
  • “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 Wednesday rose +26.5% y/y 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 U.S. Dollar Index fell 1.1% to 97.97, turning negative for the week (-0.6%).
  • Gold futures settled $55.10 lower (-2.7%) to $1,988.20/oz, their first decline in five sessions. Yesterday $47.40 higher (+2.4%) to $2,043.30/oz.  The highest level since the week of August 10, 2020. The high price in 2020 reached $2075.14.
  • May silver (SIK22) closed down -1.079 (-4.01%). 
  • On Friday 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.

Stocks

For The Day

  • Nasdaq index closed up 460 points or 3.6% at 13,255.56
  • S&P index rose 107.18 points or 2.57% of 4277.87
  • Dow industrial average rose to 653.6 points or 2.0% at the 33286.24
  • Russell 2000 rose 53.27 points or 2.71% to 2016.29

S&P 500 sector watch:

  • 9 of the 11 S&P 500 sectors closed higher
  • S&P 500 information technology (+4.0%), financials (+3.6%), communication services (+3.5%), and consumer discretionary (+2.9%) sectors led
  • Energy sector (-3.2%, utilities sector (-0.8%)

Key Earnings Reviews


  • Bumble (BMBL 20.22, +3.56): +21.4% on better-than-feared earnings results. Regarding guidance, the company guided Q1 revenue below consensus and guided FY22 revenue in-line with consensus estimates. 
  • Stitch Fix (SFIX 8.15, -2.86): -26.0% after guiding Q3 revenue below consensus, lowering its full-year revenue growth view, and withdrawing its adj. EBITDA guidance. SFIX beat EPS estimates. 
  • Figs (FIGS 15.79, +1.75): +12.5% after beating EPS estimates and guiding FY22 revenue above consensus. 
  • XPO Logistics (XPO 70.19, +8.26): +13.3% after announcing plans to spin off its brokered transportation services.
  • Casey’s General (CASY 173.00, +1.17): +0.7% after beating EPS estimates and increasing its share repurchase program by $100 mln. CASY reiterated its FY22 guidance.

US Markets YTD

  • Dow Jones Industrial Average -8.4% YTD
  • S&P 500 -10.3% YTD
  • Russell 2000 -10.0% YTD
  • Nasdaq Composite -15.3% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • German DAX +7.1%
  • UK FTSE 100 +2.8%
  • French CAC +6.6%
  • Italy MIB +6.3%
  • Spain IBEX +4.5%

Asia

  • Japan’s Nikkei: +1.0%
  • Hong Kong’s Hang Seng: -0.7%
  • China’s Shanghai Composite: -1.1%
  • India’s Sensex: +2.3%
  • South Korea’s Kospi: CLOSED
  • Australia’s ASX All Ordinaries: +1.1%.

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 retreated for the third consecutive day on Wednesday. Today’s selling lifted the 10-yr yield to its highest level in over a week while the 2-yr yield rose to a fresh high for the year.

  • 2-yr: +4 bps to 1.67%
  • 3-yr: +8 bps to 1.85%
  • 5-yr: +7 bps to 1.88%
  • 10-yr: +8 bps to 1.95%
  • 30-yr: +6 bps to 2.30%
  • 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.
  • $34 bln 10-year Treasury note reopening results (prior 12-auction average): High yield: 1.920% (1.551%).
  • Bid-to-cover: 2.47 (2.50).
  • Indirect bid: 68.2% (67.6%).
  • Direct bid: 18.0% (16.6%).

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

  • The weekly MBA Mortgage Index rose 8.5% to follow last week’s 0.7% decrease. The Purchase Index rose 8.7% while the Refinance Index increased 8.5%.
  • Job openings decreased to 11.263 mln in January from a revised 11.448 mln (from 10.925 mln) in December.

Europe

  • France’s Q4 nonfarm payrolls 0.4% qtr/qtr (last 0.5%)
  • Italy’s January Industrial Production -3.4% m/m (expected 0.0%; last -1.1%); -2.6% yr/yr (expected 3.2%; last 4.8%)
  • The Russian foreign minister is meeting with his Ukrainian counterpart in Turkey today.
  • The U.K.’s National Institute of Economic and Social Research warned that the U.K. is headed for a recession if high energy prices persist.
  • EU Commissioner Timmermans refuted yesterday’s report that the EU plans to sell joint debt to finance energy and defense.

Asia

  • China’s February CPI 0.6% m/m (expected 0.3%; last 0.4%); 0.9% yr/yr, as expected (last 0.9%). February PPI 8.8% yr/yr (expected 8.7%; last 9.1%)
  • Japan’s Q4 GDP 1.1% qtr/qtr (expected 1.4%; last 1.3%); 4.6% yr/yr (expected 5.6%; last 5.4%). Q4 GDP Capital Expenditure 0.3% qtr/qtr (expected 0.7%; last 0.4%) and Q4 GDP Private Consumption 2.4% qtr/qtr (expected 2.7%; last -1.3%)
  • Australia’s March Westpac Consumer Sentiment -4.2% (last -1.3%)
  • New Zealand’s Q4 Manufacturing Sales Volume 8.2% qtr/qtr (last -6.4%)
  • Conservative candidate Yoon Suk-yeol will be South Korea’s next president after his main opponent conceded.
  • Reserve Bank of Australia Governor Lowe said that the cash rate could be increased later this year.
  • State refiners in China have been told to suspend exports of diesel and gasoline in April. Komatsu reported that the use of its machinery in China increased for the first time in eleven months in February.
  • Reserve Bank of Australia Governor Lowe said that the cash rate could be increased later this year.

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!

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