Market Wrap – Gold and Nickel’s Turn to Bring Tears to Commodity Shorts March 8, 2002

Volatility took another level today driven by geopolitical headlines with $VIX exploding higher. The S&P 500 lost 0.7%, Nasdaq Composite (-0.3%) and Dow Jones Industrial Average (-0.6%) were all lower, while the Russell 2000 (+0.6%) closed higher.  The energy (+1.4%) and consumer discretionary (+0.1%) sectors closed higher. WTI oil flirted with $130 per barrel as the U.S. moved to ban energy imports from Russia. The UK and EU said they would phase out their Russian energy imports this year, with the UK exploring options for a ban on gas imports.

We look at the indices, $AAPL, $AMZN, 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

Live on YouTube

After the Biden announcement was classic buy the rumor sell the fact and oil and oil stocks sold off hard. The market also rallied hard to session highs amid a report indicating that Ukraine was no longer insisting on NATO membership. The reality was that report was out yesterday and upon realization the markets sold off to lows.

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.

We look at the indices, Gold, Copper, BTC, ETH, Natgas, and oil in the podcast. De-risking may threaten progress that has been achieved on since the COVID bailout. It also has the potential to reverse some of the progress made in protecting downside risk if banks close or restrict access to money.


Market Closes

Energy

  • April WTI crude oil (CLJ22) futures settled at $123.70. That’s up $4.30 or 3.6% from the settle level of $119.40 yesterday. The high $129.44. The low $117.07
  • The high price today was the highest level since 2008. From a swing low on December 6 at $62.46 to the high price of $129.44. The swing low from the May 2, 2011, high at $114.79 was broken. The highest level since the week of September 8, 2008. The highest in 2008 was $147.27.
  • April RBOB gasoline (RBJ22) closed up +2.81 (+0.79%).
  • April Nymex natural gas (NGJ22) settled Tuesday down by -0.306 (-6.33%).
  • Maxar said Tuesday that it expects warmer weather across the Midwest, East, and the Rockies from March 13-17 and above-average temperatures across the East and Midwest from March 18-22.
  • “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 Tuesday rose +5.5% w/w to 12.3 bcf.   On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.

Commodities and FX

  • The dollar index (DXY00) he U.S. Dollar Index decreased 0.2% to 99.06. 
  • Gold futures settled $47.40 higher (+2.4%) to $2,043.30/oz.  Saw the highest level since the week of August 10, 2020. The high price in 2020 reached $2075.14.
  • May silver (SIK22) closed up +1.175 (+4.57%).
  • 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

  • Dow industrial average fell -185.68 points or -0.57% at the 32631.73
  • Dow industrial average was up 585 points at its high, and down -238 point at its low
  • S&P index fell -30.47 points or -0.73% at 4170.63
  • S&P index is up 75.94 points at its high, and down -43.89 points at its low
  • NASDAQ index felt -35.4 points or -0.28% at 12795.56
  • NASDAQ index reached a day high of 328.48 points, and a low -160.80 points.
  • Russell 2000 was the only index to move higher with a gain of 11.68 points or 0.60% at 1963.01

S&P 500 sector watch:

  • 9 of the 11 S&P 500 sectors closed lower
  • Consume staples (-2.6%), health care (-2.1%), and utilities (-1.6%) sectors at the bottom of the standings.
  • On the upside, the energy (+1.4%) and consumer discretionary (+0.1%) sectors closed higher. 

Some of the big losers today include:

  • Shopify, -8.16%
  • Intuitive Surgical, -7.98%
  • Crowdstrike holdings, -6.35%
  • Northrop Grumman, -6.04%
  • General Mills, -5.81%
  • Fortinet, -4.99%
  • Rocket, -4.96%
  • General Dynamics, -4.84%
  • Corsair, -4.19%
  • Boston Scientific, -3.85%
  • Lockheed Martin, -3.64%
  • Raytheon technologies -3.41%

Some big winners today included:

  • AirBNB, +8.01%
  • Goodrx, +7.71%
  • Uber, +7.63%
  • Deutsche Bank +7.45%
  • Schlumberger +7.05%
  • Caterpillar +6.78%
  • DoorDach +6.45%
  • First Solar, +6.03%
  • Live Nation +5.66%
  • Southwest Air Plus 5.38%
  • Bed Bath & Beyond +5.3%
  • Exxon +5.24%

The best of the Dow 30

  • Caterpillar +6.78%
  • Chevron +5.44%
  • Boeing +2.65%

The worst of the Dow 30

  • Procter & Gamble -3.96%
  • Coca-Cola -3.96%
  • UnitedHealth -2.82%

Key Earnings Reviews


  • Mandiant (MNDT 21.80, -0.69): -3.1% after confirming an agreement to be acquired by Alphabet’s (GOOG 2530.00, +2.43, +0.1%) Google for approximately $5.4 billion, or $23.00 per share, in cash. The deal is inclusive of Mandiant’s net cash.
  • Dick’s Sporting  Goods (DKS 104.25, +4.75): +4.8% after beating top and bottom-line estimates and guiding FY23 EPS above consensus.
  • Dell (DELL 50.68, +1.35): +2.7% after the stock was upgraded to Outperform from In-line at Evercore ISI.
  • Alaska Air (ALK 44.45, +0.76): +1.7% after the company provided an update on fuel costs following its 11% decline yesterday. The company expects first quarter economic fuel costs to be $2.60 to $2.65 per gallon versus prior expectation of $2.45 to $2.50 per gallon. 

US Markets YTD

  • Dow Jones Industrial Average -10.2% YTD
  • S&P 500 -12.5% YTD
  • Russell 2000 -12.6% YTD
  • Nasdaq Composite -18.2% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • German DAX, unchanged
  • France’s CAC, -0.32%
  • UK’s FTSE 100, unchanged
  • Spain’s Ibex, +1.8%
  • Italy’s FTSE MIB +0.8%

Asia

  • Japan’s Nikkei: -1.7%
  • Hong Kong’s Hang Seng: -1.4%
  • China’s Shanghai Composite: -2.4%
  • India’s Sensex: +1.1%
  • South Korea’s Kospi: -1.1%
  • Australia’s ASX All Ordinaries: -0.9%.

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 2-yr yield rose nine basis points to 1.63%, 10-yr yield rose 12 basis points to 1.87%.

  • 2-yr: +5 bps to 1.54%
  • 3-yr: +7 bps to 1.67%
  • 5-yr: +6 bps to 1.69%
  • 10-yr: +3 bps to 1.75%
  • 30-yr: UNCH at 2.15%
  • 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.

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 trade deficit widened in January to $89.7 billion (Briefing.com consensus -$87.5 billion) from a downwardly revised $82.0 billion (from -$80.7 billion). Exports were $3.9 billion less than December exports and imports were $3.8 billion more than December imports.
    • The key takeaway from the report is that it marked the third straight month of a widening deficit, underscoring weakening trade activity related to the Omicron variant and ongoing supply chain disruptions. In the same period a year ago, the trade deficit was $65.1 billion.
  • Wholesale inventories increased 0.8% in January, as expected, following a revised 2.6% increase (from 2.2%) in December.
  • The NFIB Small Business Optimism Index for February decreased to 95.7 from 97.1 in January.

Europe

  • Russia’s Deputy Prime Minister said that Europe is pushing Russia toward an embargo on gas deliveries using Nord Stream 1.
  • EU leaders are expected to finalize an agreement later this week to phase out the use of Russian oil, gas, and coal. The EU may issue joint bonds to fund energy and defense.
  • Adidas is halting sales in Russia.

Asia

  • Japan’s January Overall wage income 0.9% (last -0.4%). January Current Account deficit JPY1.189 trln (expected deficit of JPY880 bln; last deficit of JPY371 bln). January Leading Index -1.0% m/m (last 0.9%) and Coincident Indicator -0.5% m/m (last 0.4%)
  • Australia’s February NAB Business Confidence 13 (last 4)
  • Japan’s Finance Minister continued speaking in favor of higher wages.
  • Qantas CEO said that corporate demand is only about 60% pre-COVID levels and that prices will need to be increased if fuel prices don’t pull back.
  • China’s Foreign Minister Yi said that Taiwan will eventually return to the embrace of its motherland.

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!