Market Wrap – Inflation Risk and Dysfunctional Markets

A day of reversals for stocks after Red Hot CPI was ignored and then Fed Governor Brainard played Whack a mole and knocked it back down, The S&P 500 fell 0.3% on Tuesday, fading an early 1.3% gain. The Nasdaq Composite (-0.3%) and Dow Jones Industrial Average (-0.3%) followed similar price action, while the Russell 2000 (+0.3%) eked out a gain. Seven of the 11 S&P 500 sectors closed lower after each spent time up during the day. JPMorgan Chase (JPM), BlackRock (BLK), and Delta Air Lines (DAL 38.51, +0.30, +0.8%) will report earnings prior to Wednesdays open. 

We go through how the markets flow and how they interact with each other, currencies, commodities, stocks and bonds.

WTI crude futures reversed hard and settled higher by $6.53 (+6.9%) to $100.69/barrel. Natural gas saw prices not seen since 2014 just shy of $7 Btu. We look at the indices, $AAPL $WMT $VERU $ATER $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. 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

Live on YouTube

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


  • May WTI crude oil (CLK22) futures settled higher by $6.53 (+6.9%) to $100.69/barre
  • WTI off the high price of $129.44. The highest in 2008 was $147.27.
  • May RBOB gasoline (RBK22) closed up by +15.07 (+5.02%).
  • The May Nymex gas futures contract on Tuesday closed up +0.037 (+0.56%).
  • 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.”
  • The National Oceanic and Atmospheric Administration (NOAA) said Tuesday that below-normal temperatures are expected across most of the U.S. next week.  As a result, the concern is rising that the colder U.S. spring temperatures will delay the rebuilding of U.S. nat-gas inventories that are already at a 3-year low.
  • BNEF data showed gas flows to U.S. export terminals Monday rose by +379% w/w to 12.7 bcf.  In March gas flows to U.S. export terminals rose to a record 13.77 bcf.
  • Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended March 25 were unchanged at a 2-1/4 year high of 137 rigs.  Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).

Commodities and FX

  • The U.S. Dollar Index rose for the ninth consecutive day to a fresh high for the year, climbing 0.4% to 100.31.
  • Gold futures settled up +27.90 (+1.43%)
  • May silver (SIK22) closed up +0.748 (+2.99%). 
  • Bitcoin CME APR 22 settle -665 39290.0


For The Day

  • Dow industrial average fell -87.74 points or -0.26% at 34220.35
  • S&P index fell -15.08 points or -0.34% at 4397.46
  • NASDAQ index fell -40.39 points or -0.30% at 13371.56
  • Russell 2000 rose 6.61 points or +0.33% at 1986.93
  • VIX +1.06 to 22.09
  • NYSE Adv 1588 Dec 1604 Vol 873.0 mln
  • Nasdaq Adv 1920 Dec 2533 Vol 4.8 bln

S&P 500 sector watch:

  • Seven of the 11 S&P 500 sectors closed lower after each was positive during the day.
  • Financials (-1.1%) and health care (-1.0%) sectors declined
  • Energy (+1.7%), utilities (+0.4%), and consumer discretionary (+0.2%) sectors closed higher. 

Key After Hours

US Markets YTD

  • Dow Jones Industrial Average -5.8% YTD
  • S&P 500 -7.7% YTD
  • Russell 2000 -11.5% YTD
  • Nasdaq Composite -14.5% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics


  • UK FTSE 100 -0.4%
  • German DAX -0.5%
  • French CAC -0.3%
  • Italy MIB -0.4%
  • Spain IBEX -0.2%
  • Stoxx 600 -0.3%


  • Japan’s Nikkei: -1.8%
  • Hong Kong’s Hang Seng: +0.5%
  • China’s Shanghai Composite: +1.5%
  • India’s Sensex: -0.7%
  • South Korea’s Kospi: -1.0%
  • Australia’s ASX All Ordinaries: -0.5%.

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 Tuesday mostly higher note, as the 10-yr note and shorter tenors rallied while the long bond finished slightly lower. The 10-yr note dipped from its intraday high after the completion of today’s weak $34 bln 10-yr note reopening while the long bond turned negative in late trade, finishing with a slight loss.

  • 2-yr: -11 bps to 2.39%
  • 3-yr: -13 bps to 2.60%
  • 5-yr: -11 bps to 2.68%
  • 10-yr: -6 bps to 2.73%
  • 30-yr: +1 bp to 2.83%

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



  • Cisco (CSCO 51.63, -1.25): -2.4% after the stock was downgraded to Sell from Neutral at Citigroup.
  • CarMax (KMX 99.50, -3.67): -3.6% after missing EPS estimates on above-consensus revenue.
  • Albertsons (ACI 33.50, -1.28): -3.7% despite beating top and bottom-line estimates.
  • American Airlines (AAL 16.95, -0.02): -0.1% despite raising its Q1 revenue guidance. The company now expects a revenue decline of 16% from Q1 of 2019 (prior guidance decline of 17%).
  • CrowdStrike (CRWD 224.80, +8.20): +3.8% after the stock was upgraded to Buy from Neutral at Goldman.


  • Eurozone’s April ZEW Economic Sentiment -43.0 (expected -46.5; prior 38.7)
  • Germany’s April ZEW Economic Sentiment -41.0 (expected -48.0; last -39.3) and ZEW Current Conditions -30.8 (expected -35.0; last -21.4). March CPI 2.5% m/m, as expected (last 0.9%); 7.3% yr/yr, as expected (last 5.1%). March WPI 6.9% m/m (last 1.7%); 22.6% yr/yr (last 16.6%)
  • U.K.’s February Average Earnings Index + Bonus 5.4% yr/yr, as expected (last 4.8%). February three-month employment change 10,000 (expected 50,000; last -12,000) and March Claimant Count -46,900 (expected -41,100; last -58,000). February Unemployment Rate 3.8%, as expected (last 3.9%)
  • France’s February trade deficit EUR10.30 bln (last deficit of EUR8.00 bln). February Current Account deficit EUR1.10 bln (last deficit of EUR1.30 bln)
  • Reports suggest more sanctions for Russia will be forthcoming.


  • Japan’s March PPI 0.8% m/m (expected 0.9%; last 0.9%); 9.5% yr/yr (expected 9.3%; last 9.7%). March Bank Lending 0.5% m/m (last 0.3%)
  • Australia’s March NAB Business Survey 18 (last 9)
  • New Zealand’s Q1 NZIER Business Confidence -40% (last -28%). February External Migration & Visitors -1.2% (last -26.0%)
  • Japan’s March PPI increased at its fastest pace since 1891 while the February reading was revised higher.
  • The U.S. reportedly ordered non-emergency staff to leave the Consulate in Shanghai.
  • A former Reserve Bank of Australia economist said that he does not expect Australia’s cash rate to be increased soon.
  • Economists have a split view of the upcoming Bank of Korea policy meeting on Thursday with nearly half expecting the base rate to remain at 1.25%.

Looking ahead:

  • The Day Ahead:
    • 7:00 ET: Weekly MBA Mortgage Index (prior -6.3%)
    • 8:30 ET: March PPI ( consensus 1.2%; prior 0.8%) and Core PPI ( consensus 0.5%; prior 0.2%)
    • 10:30 ET: Weekly crude oil inventories (prior +2.42 mln)
  • Treasury Auctions:
    • 13:00 ET: $20 bln 30-yr Treasury bond reopening results

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!