Market Wrap – Bulls Run for Second Day May 26, 2022

Energy stocks were banging new highs all morning as natural gas headed back to test that $9.399 high before selling off with expiration and EIA in the mix. Stocks continued on from yesterday’s run. A reversal from $NVDA coupled with better-than-expected guidance from retailers fed the bull. Macy’s (M 22.92, +3.71, +19.3%), Dollar General (DG 222.60, +27.26, +14.0%), Dollar Tree Stores (DLTR 162.80, +29.21, +21.9%), and Williams-Sonoma (WSM 129.70, +14.72, +12.8%),

We look at the indices, $AAPL $TSLA $NVDA $DG $WSM Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through to today’s action and where to now …

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 market.

Market Closes

Energy

  • Crude Oil Futures settled July at $114.09 Up $3.76 or 3.14%
  • The high price $114.83. The low $110.27.
  • WTI off the high price of $129.44. The highest in 2008 was $147.27.
  • Brent Crude Futures 114.46 0.29 0.25
  • Natural Gas Futures 8.837 -0.058 -0.65
  • Unleaded Gasoline Futures 3.7887 -0.0037 -0.10
  • 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.”

Commodities and FX

  • The U.S. Dollar Index slipped 0.2% to 101.83.
  • Gold futures settled $1.30 higher (+0.1%) to $1,847.60/oz.
  • Silver Futures 22.025 0.060 0.27
  • Copper Futures 4.2690 0.0100 0.23
  • Corn Futures 763.50 -8.75 -1.13
  • Wheat Futures 1142.25 -6.00 -0.52
  • Bloomberg Commodity Index 133.26 1.16 0.88
  • Bitcoin USD 29487 40 0.13
  • Ethereum USD 1827.61 1.56 0.09
  • Ripple USD 0.3967 0.0022 0.56

Stocks

US Indices & S&P 500 sector watch:

  • Dow industrial average up 516.91 points or 1.61% at 32637.20
  • S&P index is up 79.11 points or 1.99% at 4057.85
  • NASDAQ index is up 305.92 points or 2.68% at 11740.66
  • Russell 2000 is up 39.07 points or 2.17% at 1838.23
  • NYSE Composite 15664.00 251.80 1.63
  • CBOE Volatility 27.50 -0.87 -3.07
  • NYSE Adv 2729 Dec 569 Vol 1.0 bln]
  • Nasdaq Adv 3562 Dec 1160 Vol 4.6 bln
  • S&P 500 consumer discretionary sector (+4.8%) nformation technology (+2.5%), financial (+2.3%), and communication services (+2.1%) sectors. Notably, those four sectors have been the worst-performing sectors this year.

Key After Hours

  • American Eagle (AEO) reports Q1 (Apr) results, misses on revs; expects total revs in FY23 up in the low-single-digits yr/yr… AEO down 9.4%
  • Autodesk (ADSK) beats by $0.09, beats on revs; guides Q2 EPS in-line, revs in-line; guides FY23 EPS below consensus, revs in-line… ADSK up 0.3%
  • Broadcom (AVGO): VMware deal includes a $1.5 bln break up fee if VMW backs out; there is also a $750 mln fee if VMW agrees to superior proposal by July 5
  • Costco (COST) beats by $0.02, beats on revs, adjusted comparable sales of +10.8%… COST down 2.2%
  • Dell (DELL) beats by $0.45, beats on revs… DELL up 6.3%
  • Gap (GPS) misses by $0.31, reports revs in-line, comps -14%; guides FY23 EPS and revenue below consensus; expects results to improve modestly in the back half of the year… GPS down 13.2%
  • Marvell (MRVL) beats by $0.01, beats on revs; guides Q2 EPS in-line, revs in-line… MRVL up 2.3%
  • Red Robin Gourmet (RRGB) beats by $0.61, beats on revs; reaffirms FY22 guidance… RRGB up 12.7%
  • Ulta Beauty (ULTA) beats by $1.81, beats on revs, comps of +18%; guides FY23 EPS above consensus, revs above consensus, raises comp guidance to +6-8%… ULTA up 6.2%
  • Workday (WDAY) misses by $0.02, reports revs in-line; expects JulQ subscription revenue growth of +22% yr/yr; raises FY23 subscription revenue slightly to $5.537-5.557 bln… WDAY down 9.0%
  • Zscaler (ZS) beats by $0.06, beats on revs; guides JulQ EPS above consensus, revs above consensus; announces partnership with Siemens to deliver solution to accelerate secure digitalization for OT environments… ZS up 0.6%

US Markets YTD

  • Dow Jones Industrial Average -10.0% YTD
  • S&P 500 -14.9% YTD
  • S&P 400 -12.6% YTD
  • Russell 2000 -18.1% YTD
  • Nasdaq Composite -25.0% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

Index – Last – Chg – % Chg

Europe

  • UK: FTSE 100 7564.92 42.17 0.56
  • Germany: DAX 14231.29 223.36 1.59
  • France: CAC 40 6410.58 111.94 1.78
  • Italy: FTSE MIB 24546.50 296.05 1.22
  • Spain: IBEX 35 8888.80 128.60 1.47
  • Stoxx Europe 600 437.71 3.40 0.78
  • Switzerland: Swiss Market 11491.80 8.24 0.07

Asia

  • Hong Kong: Hang Seng 20171.27 59.17 0.29
  • Japan: Nikkei 225 26677.80 -70.34 -0.26
  • China: Shanghai Composite 3107.46 36.54 1.19
  • India: S&P BSE Sensex 53749.26 -303.35 -0.56
  • Australia: S&P/ASX 7155.2 26.4 0.37
  • S. Korea: KOSPI 2617.22 11.35 0.44

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 ended Thursday on a mixed note, today’s $42 bln 7-yr note sale, which met stellar demand, closing out this week’s impressive note auction slate. The 5-yr note ended green while 10s and 30s finished with modest losses.

  • 2-yr: -2 bps to 2.48%
  • 3-yr: UNCH at 2.63%
  • 5-yr: -1 bp to 2.72%
  • 10-yr: +1 bp to 2.76%
  • 30-yr: +3 bps to 2.99%

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

Market Notables

  • Dick’s Sporting Goods (DKS) issuing FY23 EPS guidance well below consensus to account for the expected impact of “evolving macroeconomic conditions”; DKS shares indicated 14% lower
  • Nordstrom (JWN) jumps 3.9% following better-than-expected FY23 outlook
  • Wendy’s (WEN) up 8% after filing by Trian Fund suggests it intends to explore and evaluate potential transactions with company to enhance shareholder value

USA

Europe

Asia

  • Yonhap reported that South Korea will present measures to stabilize prices in the coming days.
  • Japan’s March Corporate Services Price Index was up 1.7% yr/yr (expected 1.5%; last 1.3%).
  • Singapore’s April Industrial Production rose 2.2% m/m (expected 8.1%; last -11.2%), increasing 6.2% yr/yr (expected 5.1%; last 5.1%).
  • Hong Kong’s April trade deficit reached HKD36.6 bln (last deficit of HKD37.3 bln) as imports grew 2.1% m/m (last -6.0%) and exports rose 1.1% m/m (last -8.9%).
  • With Inflation at Thirteen Year Highs Bank of South Korea Raise Rates Again To 1.75% – TRADERS COMMUNITY

Looking ahead:

The Day Ahead:

  • Traders Market Weekly: Bear Jitters as Risk Factors Deepen – TRADERS COMMUNITY
  • Monday: Nothing of note
  • Tuesday: Preliminary May IHS Markit Manufacturing PMI (prior 59.2) and preliminary May IHS Services PMI (prior 55.6) at 9:45 ET; April New Home Sales (prior 763,000) at 10:00 ET; and $47 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -11.0%) at 7:00 ET; April Durable Orders (prior 0.8%) and Durable Orders ex-transportation (prior 1.1%) at 8:30 ET; weekly crude oil inventories (prior -3.39 mln) at 10:30 ET; $48 bln 5-yr Treasury note auction results at 13:00 ET; and May FOMC Minutes at 14:00 ET
  • Thursday: Q1 GDP — second estimate (prior -1.4%), Q1 GDP Deflator — second estimate (prior 8.0%), weekly Initial Claims (prior 218,000), Continuing Claims (prior 1.317 mln) at 8:30 ET; April Pending Home Sales (prior -1.2%) at 10:00 ET; weekly natural gas inventories (prior +89 bcf) at 10:30 ET; and $42 bln 7-yr Treasury note auction result at 13:00 ET
  • Friday: April Personal Income (prior 0.5%), Personal Spending (prior 1.1%), PCE Prices (prior 0.9%), Core PCE Prices (prior 0.3%), April advance goods trade deficit (prior -$125.30 bln), April advance Retail Inventories (prior 2.0%), and April advance Wholesale Inventories (prior 2.3%) at 8:30 ET; and final May University of Michigan Consumer Sentiment survey (prior 59.1) at 10:00 ET

Wednesday, May 25

WASHINGTON – Federal Reserve Vice Chair Lael Brainard gives commencement remarks before the Johns Hopkins University School of Advance International Studies 2022 Commencement Ceremony, 1215 EDT/1615 GMT. Text available. No Q&A. Webcast at https://www.youtube.com/watch?v=d4z2VRB4GZU. DAR Constitution Hall, 1776 18th Street N.W. Contact: Danielle Khan, dkhan@jhu.edu or 202 963 8865

Monday, May 23

ATLANTA – Federal Reserve Bank of Atlanta President Raphael Bostic participates in conversation on the economic outlook before an Atlanta Rotary event, 1200 EDT/1600 GMT. No livestream. Audience and media Q&As expected. No embargoed text. Loudermilk Conference Center, 40 Courtland Street. RSVP to attend: media Karen Mracek, karen.mracek@atl.frb.org

Earnings:


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!