Another volatile day for energy with Natural Gas extreme volatility falling from 9.40 to under 8 to over 9 in less than 24 hours. The ECB meeting set off volatility and bonds. The euro reversed after today’s ECB rallying first and then declining 90 pips below the May 31 low to the worst levels in two weeks. This eventually worked through to the US Stock markets with major indices all closed at their lows for the session with CPI tomorrow. The downside was led by the NASDAQ which fell -2.75%. The Dow industrial average closed down -1.94%. Nasdaq -2.75% and SP 500 down -2.38%. The CBOE Volatility Index jumped 9.1% to 26.15.
The 10-yr note yield settled its session up two basis points at 3.04%, but the 2-yr note yield jumped five basis points to 2.82% and hit its highest level since late-2018.
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 & Kimo 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 July Futures settle at $121.51/bbl, down 60 CENTS, 0.49%
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- Diesel July Futures settle at $4.40
- Gasoline July Futures settle at $4.2762
- Natural Gas July Futures settle at $8.9630/MMBTU.
- Brent Crude Futures settle at $123.07/bbl, down 51 cents, 0.41%
- 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 increased 0.8% to 103.32
- Euro reversed after today’s ECB rallying first and then declining 90 pips below the May 31 low to the worst levels in two weeks. EUR/USD was down 0.9% to 1.0614.
- Gold futures settled $3.70 lower (-0.2%) to $1,852.80/oz
- Silver Futures 21.695 -0.399 -1.81
- Copper Futures 4.3685 -0.0860 -1.93
- Corn Futures 772.25 7.75 1.01
- Wheat Futures 1073.00 -1.75 -0.16
- Bloomberg Commodity Index 136.61 0.57 0.42
- Bitcoin USD 30199 60 0.20
- Ethereum USD 1796.57 4.13 0.23
- Ripple USD 0.4007 0.0009 0.22
US Indices & S&P 500 sector watch:
- Dow industrial average -638.11 points or -1.94% at 32272.78
- S&P index -97.97 points or -2.38% at 4017.81
- NASDAQ index -332.04 points or -2.75% at 11754.24
- Russell 2000 -40.15 points or -2.12% at 1850.85
- NYSE Composite 15472.46 -371.37 -2.34
- CBOE Volatility 26.09 2.13 8.89
- NYSE Adv 568 Dec 2749 Vol 895 mln
- Nasdaq Adv 1224 Dec 3414 Vol 5.3 bln
- Worst-performing sectors were the economically sensitive again and technology. Communication services sector (-2.8%), information technology (-2.7%) and financial (-2.6%)
- Eight of the 11 sectors declined at least 2.3%.
The top 3 Dow decliners:
- Boeing, -4.19%
- Walt Disney, -3.8%
- Apple -3.6%
- The only gainer in the Dow 30 was Home Depot which rose 0.82%.
Big losers today included:
- Novavax, -17.22%.
- Moderna, -9.76%
- Block, -9.69%
- Beyond Meat, -8.74%
- Alibaba, -8.13%
- Nio, -7.7%
- DoorDash -7.14%
- Roblox, -6.98%
- GameStop -6.93%
- AirBnB, -6.5%
Big gainers included:
- Chewy, +2.83%
- Fortinet, +0.99%
- Costco, +0.87%
- Home Depot, +0.82%
- Whirlpool, +0.15%
- Bristol-Myers Squibb, +0.03%
Market Pre-Market Notables
- DocuSign (DOCU) misses by $0.08, beats on revs; guides Q2 revs in-line; reaffirms FY23 revs but lowers FY23 billings guidance… DOCU down 21.8%
- InterActiveCorp (IAC) and Angi Inc. (ANGI) report May 2022 performance metrics… IAC down 3.0%; no indication for ANGI
- MGM Resorts (MGM) reaches agreement to sell the operations of Gold Strike Tunica to Cherokee Nation Entertainment Gaming Holdings for $450 mln… MGM up 0.2%
- Stitch Fix (SFIX) misses by $0.14, reports revs in-line; guides Q4 revs in-line… SFIX down 14.3%
- Vail Resorts (MTN) beats by $0.15, beats on revs… MTN up 4.0%
US Markets YTD
- Dow Jones Industrial Average: -11.3% YTD
- S&P 400: -13.0% YTD
- S&P 500: -15.7% YTD
- Russell 2000: -17.5% YTD
- Nasdaq Composite: -24.9% YTD
Key After Hours
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 mostly lower note with the completion of today’s $19 bln 30-yr bond reopening, which met stellar demand after two days of mediocre note auctions. The solid demand suggests limited concern ahead of tomorrow’s release of the CPI report for May. The 10-yr yield and the 30-yr yield finished the day a handful of basis points below their intraday highs that were reached in the wake of the April CPI report while the 5-yr yield settled four basis points above its high from May 11.
- 2-yr: +5 bps to 2.82%
- 3-yr: +4 bps to 3.00%
- 5-yr: +3 bps to 3.06%
- 10-yr: +2 bps to 3.04%
- 30-yr: -1 bp to 3.17%
- American Household Wealth Falls $1.49.3 Trillion Losing $3.0 trillion in Stocks in Q1 2022 – TRADERS COMMUNITY
- 30-year Treasury Bond Auction Sees Stronger Demand than 10 and 3year Notes ahead of Hot CPI and PPI – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Storage Added 97 Bcf as LNG Exports Grow – TRADERS COMMUNITY
- Initial jobless claims for the week ending June 4 increased by 27,000 to 229,000 (consensus 208,000) while continuing claims for the week ending May 28 were unchanged at 1.306 million.
- Another Weak U.S. 10-year Treasury Bond Auction Graded D Minus with High Yield of 3.03% and 1.2 Basis Point Tail – TRADERS COMMUNITY
- Around The Barrel – Crude Oil SPR Pull of 7.3Mbbls to PADD3 with Exports 8.11Mbpd – TRADERS COMMUNITY
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023 – TRADERS COMMUNITY
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels – TRADERS COMMUNITY
- Treasuries Pull Back After Weak Demand for U.S. 3-year Bond Auction with High Yield of 2.927% – TRADERS COMMUNITY
- U.S. Trade Deficit Pulls Back from Record as Exports Rise Led by Natural Gas, Petroleum Products and Soybeans – TRADERS COMMUNITY
Index – Last – Chg – % Chg
- German DAX, -247.19 points or -1.71% at 14198.81
- France’s CAC -90.17 points or -1.4% at 6358.47
- UK’s FTSE 100 -116.81 points or -1.54% at 7476.20
- Spain’s Ibex, -131.5 points or -1.49% at 8711.21
- Italy’s FTSE MIB -122 points or -1.75% at 23813
- ECB Leaves Rates Unchanged as Expected, Intends to Raise in July and September – TRADERS COMMUNITY
- British Chambers of Commerce lowered the U.K.’s growth forecast for 2022 to 3.5% from 3.6%, expecting inflation to reach 10.0% in Q4.
- Italy’s Prime Minister Draghi called for a joint EU mechanism to help member states deal with energy costs.
- France’s Q1 nonfarm payrolls rose 0.3% qtr/qtr (last 0.3%).
Index – Last – Chg – % Chg
- Japan’s Nikkei: UNCH
- Hong Kong’s Hang Seng: -0.7%
- China’s Shanghai Composite: -0.8%
- India’s Sensex: +0.8%
- South Korea’s Kospi: UNCH
- Australia’s ASX All Ordinaries: -1.5%
- South Korea’s Finance Minister Choo said that the new government’s economic policies will be announced next week and that all efforts will be made to stabilize prices.
- The Commonwealth Bank of Australia expects the Reserve Bank of Australia to begin cutting rates in 2023.
- China’s May trade surplus reached $78.76 bln (expected surplus of $58.00 bln; last surplus of $51.12 bln) as imports grew 4.1% yr/yr (expected 2.0%; last 0.0%) and exports increased 16.9% yr/yr (expected 8.0%; last 3.9%).
- Record Private Equity M&A deals Targeting Australian Companies – TRADERS COMMUNITY
- RBA Accelerates Rate Cycle as it Raises Rates by 50bps to 0.75% – 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.
- Traders Market Weekly: Inflation and Central Banker Rate Watch – TRADERS COMMUNITY
- Tuesday: April Trade Balance (prior -$109.80 bln) at 8:30 ET; $44 bln 3-yr Treasury note auction results at 13:00 ET; and April Consumer Credit (prior $52.40 bln) at 15:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -2.3%) at 7:00 ET; April Wholesale Inventories (prior 2.3%) at 10:00 ET; weekly crude oil inventories (prior -5.07 mln) at 10:30 ET; and $33 bln 10-yr Treasury note reopening results at 13:00 ET
- Thursday: Weekly Initial Claims (prior 200,000) and Continuing Claims (prior 1.309 mln) at 8:30 ET; weekly natural gas inventories (prior +90 bcf) at 10:30 ET; and $19 bln 30-yr Treasury bond reopening results at 13:00 ET
- Friday: May CPI (prior 0.3%) and Core CPI (prior 0.6%) at 8:30 ET; preliminary June University of Michigan Consumer Sentiment survey (prior 58.4) at 10:00 ET; and May Treasury Budget (prior $308.00 bln) at 14:00 ET
Monday (June 6)
After-Hours: COUP GTLB
Tuesday (June 7)
Pre-Market: ASO CBRL PLAY GIII MOMO SJM REVG UNFI
After-Hours: CASY GWRE SMAR CURV VRNT
Wednesday (June 8)
Pre-Market: BF.B CPB KC LOVE OLLI THO VRA
After-Hours: ABM BASE FIVE GEF AVO OXM YEXT
Thursday (June 9)
Pre-Market: BILI FCEL NIO SIG
After-Hours: CMTL DOCU SFIX MTN
Friday (June 10)
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!