The post FOMC meeting delusional stock market rally reacted the next day as one would suspect after the Fed raised 75 bps sending the $ES_F and other indices sharply lower. The declines were led by the Nasdaq as it nears its 200-week MA for the first time since the start of the pandemic in March 2020. The major indices are down 6 of 7 trading days. The big catalyst to remind the machines was the SNB hiking a surprise 50bp. The BOE and Brazil also raised rates. Stagflation worries from the ongoing inflation pressures and the Atlanta Fed’s GDPNow model estimating Q2 real GDP to be flat.
Through in a dismal housing report, mortgage rates at 2008 levels and US President Biden looking more and more out of touch with reality in his energy policy and knowledge. Nerves are expanding it appears, gold futures settled $30.30 higher (+1.7%) to $1,849.90/oz, aided by a sharp move lower in the dollar. U.S. Treasuries ended Thursday on a higher note after overcoming a weak start. The 10-yr yield lower by nine basis points to 3.31% while the 2-yr yield fell eleven basis points to 3.16%.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
This week we have inflation data and more Central Bank action as a result yields, energy prices and the USDJPY are in focus.
We talk through to today’s action and where to now ….
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.
- WTI Crude Oil Futures 116.89 1.58 1.37%
- Brent Crude Futures 119.04 -0.77 -0.64%
- Natural Gas Futures 7.425 0.005 0.07%
- Unleaded Gasoline Futures 3.8831 -0.0111 -0.29%
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels
- 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 climbed for the fifth consecutive day, rising 0.5% to 105.55.
- Gold futures settled $30.30 higher (+1.7%) to $1,849.90/oz with a sharp move lower in the dollar.
- Silver Futures 21.965 0.545 2.54%
- Copper Futures 4.1030 -0.0605 -1.45%
- Corn Futures 787.75 13.75 1.78%
- Wheat Futures 1079.75 29.75 2.83%
- Bloomberg Commodity Index 130.32 0.88 0.68%
- Bitcoin USD 20688 -997 -4.60%
- Ethereum USD 1094.18 -83.26 -7.07%
- Ripple USD 0.3181 -0.0078 -2.39%
US Indices & S&P 500 sector watch:
- Dow industrial average fell -741.48 or -2.42% at 29927.06
- S&P fell -123.24 points or -3.25% at 3666. 76
- Nasdaq fell -453.05 or -4.08% at 10646.11
- Russell 2000 fell -81.30 points or -4.70% at 1649.83
- NYSE Composite 14142.19 -453.04 -3.10
- CBOE Volatility 32.95 3.33 11.24
- NYSE Adv 306 Dec 2700 Vol 1.37 bln
- Nasdaq Adv 905 Dec 2947 Vol 5.65 bln
- Declining issues outpaced the advancing issues by a greater than 9-to-1 margin at the NYSE and almost 4-to-1 at the Nasdaq.
- All 11 of the S&P 500 sectors closed down with the selling led by energy (-5.6%), consumer discretionary (-4.8%), information technology (-4.1%), and materials (-3.7%).
- The best performing sectors were the consumer staples (-0.7%), health care (-1.5%), and the utilities (-1.9%), but they could not stay out of the red.
- For the year energy’s year-to-date gain to 39.2% while the remaining ten groups now show year-to-date losses between 9.2% (utilities) and 34.7% (consumer discretionary).
- The worst performing stock in the Dow 30 was American Express at -5.93%. Walmart was the best performer at 1.06%.
Chipmakers had an even worse showing than the tech sector, as the PHLX Semiconductor Index fell 6.2%.
Market Pre-Market Notables
- Samsung Electronics temporarily halts procurement orders and seeks shipment delays from suppliers due to excess inventories, according to Nikkei
- Tesla (TSLA) raising prices across entire vehicle lineup, according to Reuters
- Revlon (REV) files for Chapter 11 bankruptcy protection
US Markets YTD
- Dow Jones Industrial Average -17.6% YTD
- S&P 400 -22.5% YTD
- S&P 500 -23.1% YTD
- Russell 2000 -26.5% YTD
- Nasdaq Composite -32.0% YTD
Key After Hours
- Adobe (ADBE) beats by $0.04, reports revs in-line; guides Q3 EPS and revs below consensus; lowers FY22 EPS and revenue guidance… ADBE down 4.3%
- TechnipFMC (FTI) awarded a significant contract by TotalEnergies EP Angola to supply subsea production systems for the CLOV3 development in Block 17… FTI up 3.9%
- Roku (ROKU) and Walmart (WMT) announce partnership where WMT will be the exclusive retailer to enable streamers to purchase products on Roku platform… ROKU up 4.5%; WMT up 0.2%
- U.S. Steel (X) issues upside adjusted EPS guidance for JunQ and expects record adjusted EBITDA of $1.6 bln… X up 6.6%
Cboe Daily Market Ratios:
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
U.S. Treasuries ended Thursday on a higher note after overcoming a weak start. The 10-yr yield lower by nine basis points to 3.31% while the 2-yr yield fell eleven basis points to 3.16%.
- 2-yr: -11 bps to 3.16%
- 3-yr: -9 bps to 3.35%
- 5-yr: -10 bps to 3.38%
- 10-yr: -9 bps to 3.31%
- 30-yr: -5 bps to 3.36%
- Initial jobless claims for the week ending June 11 decreased by 3,000 to 229,000 (consensus 215,000) while continuing jobless claims for the week ending June 4 increased by 3,000 to 1.312 million.
- The Philadelphia Fed survey fell to -3.3 in June (consensus 5.0) from 2.6 in May.
- US Housing Starts Fell 8.9% as Building Permits Fell 7.0% in May – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Storage Rose 92 Bcf, 323 Bcf Below Five Year Average – TRADERS COMMUNITY
- Federal Reserve Raises Rates 75 Basis Points as Expected – TRADERS COMMUNITY
- Around The Barrel – US Crude Production Hits Highest Since April 2020 as President Biden Ramps Up Blame Game on Big Oil – TRADERS COMMUNITY
- Household Financial Stress Highest Since Outset of Pandemic US Economic Optimism Index Shows – TRADERS COMMUNITY
- US Producer Price Inflation Continues Elevated in May PPI +0.8% m/m +10.8% y/y – TRADERS COMMUNITY
- U.S. Small Business Expecting Better Business Conditions Hits Record Low – TRADERS COMMUNITY
- Ethereum Collapses 20% To Yearly Lows as Risk Investors Seek Shelter from The Storm – TRADERS COMMUNITY
- American Gasoline Prices Hit Record High $5 per gallon – TRADERS COMMUNITY
Index – Last – Chg – % Chg
- U K: FTSE 100 7044.98 -228.43 -3.14
- Germany: DAX 13038.49 -446.80 -3.31
- France: CAC 40 5886.24 -143.89 -2.39
- Italy: FTSE MIB 21726.64 -746.92 -3.32
- Spain: IBEX 35 8078.10 -96.60 -1.18
- Stoxx Europe 600 402.88 -10.22 -2.47
- Switzerland: Swiss Market 10475.37 -308.22 -2.86
- European Central Bank policymaker De Guindos said that inflation may be more entrenched than policymakers previously thought.
- Eurozone’s Q1 wages rose 2.7% yr/yr (last 1.5%) and labor cost index rose 3.2% yr/yr (last 1.9%).
- Italy’s May CPI was up 0.8% m/m (expected 0.9%; last -0.1%) and up 6.8% yr/yr (expected 6.9%; last 6.0%).
- Spain’s April trade deficit reached EUR6.40 bln (last deficit of EUR4.60 bln).
Index – Last – Chg – % Chg
- Hong Kong: Hang Seng 20845.43 -462.78 -2.17
- Japan: Nikkei 225 26431.20 105.04 0.40
- China: Shanghai Composite 3285.38 -20.02 -0.61
- India: S&P BSE Sensex 51495.79 -1045.60 -1.99
- Australia: S&P/ASX 6591.1 -9.9 -0.15
- S. Korea: KOSPI 2451.41 4.03 0.16
- China’s May Home Prices decreased 0.1% yr/yr (last 0.7%).
- Japan’s May trade deficit reached JPY2.38 trln (expected deficit of JPY2.02 trln; last deficit of JPY842.8 bln). May Imports rose 48.9% yr/yr (expected 43.6%; last 28.3%) and May Exports rose 15.8% yr/yr (expected 16.4%; last 12.5%)
- South Korea’s May Import Price Index was up 36.3% yr/yr (last 35.0%) and Export Price Index was up 23.5% yr/yr (last 21.4%)
- Australia’s May employment increased by 60,600 (expected 25,000; last 4,500) and full employment increased by 69,400 (last 93,300). May Unemployment Rate remained at 3.9% (expected 3.8%) and May Participation Rate rose to 66.7% from 66.4% (expected 66.4%). MI Inflation Expectations rose to 6.7% from 5.0%.
- New Zealand’s Q1 GDP contracted 0.2% qtr/qtr (expected 0.6%; last 3.0%) but was up 1.2% yr/yr (expected 3.3%; last 3.1%).
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.
- Traders Market Weekly: The Fed’s Fight Against Inflation – TRADERS COMMUNITY
- Monday: Nothing of note
- Tuesday: May NFIB Small Business Optimism Index (prior 93.2) at 6:00 ET; May PPI (prior 0.4%) and Core PPI (prior 0.5%) at 8:30 ET
- Wednesday: Weekly MBA Mortgage Index (prior -6.5%) at 7:00 ET; May Retail Sales (prior 0.9%), Retail Sales ex-auto (prior 0.6%), May Import/Export Prices, and June Empire State Manufacturing (prior -11.6) at 8:30 ET; April Business Inventories (prior 2.0%) and June NAHB Housing Market Index (prior 69) at 10:00 ET; weekly crude oil inventories (prior +2.03 mln) at 10:30 ET; June FOMC Rate Decision (prior 0.75-1.00%) at 14:00 ET; and April net Long-Term TIC Flows (prior $23.10 bln) at 16:00 ET
- Thursday: Weekly Initial Claims (prior 229,000), Continuing Claims (prior 1.306 mln), May Housing Starts (prior 1.724 mln) and Building Permits (prior 1.819 mln), and June Philadelphia Fed Survey (prior 2.6) at 8:30 ET; and weekly natural gas inventories (prior +97 bcf) at 10:30 ET
- Friday: May Industrial Production (prior 1.1%) and Capacity Utilization (prior 79.0%) at 9:15 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!