Market Wrap – Markets Give Some Back as Oil Pops Again March 23, 2022

The three major US stock indices closed at/near their lows for the day after bonds rallied after a strong 20yr auction and oil back to $115. Dow industrial average has its worst day in more than two weeks. S&P index closes back below its 200-day moving average at 4474.25 and NASDAQ index closed back below its 38.2% retracement of the trading range since. $AAPL bucked the trend and closed higher.

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

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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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.


Market Closes

Energy

  • May WTI crude oil futures recovered its entire loss from yesterday, rising $5.78, or 5.3%, to $115.26/bbl.
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • April RBOB gasoline (RBJ22) closed down -4.09 (-1.21%).
  • April Nymex natural gas (NGJ22) on Wednesday closed up by +0.045 (+0.87%).
  • The Commodity Weather Group said that the Northeast will see below-normal temperatures next week and that colder temperatures are expected for the North and Central U.S. from March 27-April 4.  
  • Nat-gas prices +30% surge in European gas prices after Russian President Putin said Russia would demand ruble payments for natural gas purchases from “unfriendly” nations.  The order means some Russian contracts with European customers, which are mostly in euros, will need to be renegotiated, and any supply disruptions as a result of the changing rules will further deepen Europe’s energy crisis.
  • BNEF data showed gas flows to U.S. export terminals Wednesday rose +15.4% y/y to 13.19 bcf.  On Saturday, gas flows to U.S. export terminals rose to a record 13.77 bcf.

Commodities and FX

  • The U.S. Dollar Index on Wednesday rose +0.13%.
  • Gold futures settled $15.80 higher (+0.8%) to $1,937.30/oz to their highest finish in almost a week.
  • May silver (SIK22) closed up +0.285 (+1.14%).  
  • CME Bitcoin Futures Settle MAR 22 -140 42250.0

Stocks

For The Day

  • Dow industrial average -448.98 points or -1.29% at 34358.51
  • S&P index -55.37 points or -1.23% at 4456.23
  • NASDAQ index -186.2 points or -1.32% at 13922.61
  • Russell 2000 fell -36.13 points or -1.73% at 2052.20
  • NYSE Adv 1102 Dec 2112 Vol 944.4 mln
  • Nasdaq Adv 1567 Dec 2821 Vol 4.92 bln

S&P 500 sector watch:

  • 9 of the 11 S&P 500 sectors closed lower
  • Energy sector (+1.7%), extended this week’s gain to 4.9% with ten of its components reaching fresh 52-week highs. Utilities sector (+0.2%)
  • Financials (-1.8%) and health care (-1.8%) Wells Fargo (WFC 51.12, -2.27, -4.3%) was the worst performer among financials while ResMed (RMD 233.00, -22.05, -8.7%) was the biggest laggard in health care amid supply chain concerns.
  • Top-weighted technology (-1.5%) finished near the bottom even though its largest component Apple (AAPL 170.17, +1.35, +0.8%) recorded a solid gain. 

Key Earnings Reviews


  • Adobe (ADBE 422.90, -43.55, -9.3%) finished at the bottom of the tech sector after its Q1 beat was overshadowed by below-consensus EPS and revenue guidance for Q2.
  • General Mills (GIS 64.23, +1.55, +2.5%) beat Q3 EPS expectations and raised its FY22 EPS guidance above consensus. 
  • Archer-Daniels (ADM 89.09, +1.53, +1.8%) rallied to a fresh record in sympathy with General Mills, but the consumer staples sector still lost 0.9%.

US Markets YTD

  • Dow Jones Industrial Average -5.5% YTD
  • S&P 500 -6.5% YTD
  • Russell 2000 -8.6% YTD
  • Nasdaq Composite -11.0% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • German DAX, -1.4%
  • France’s CAC, -1.3%
  • UK’s FTSE 100, -0.2%
  • Spain’s Ibex, -1.7%
  • Italy’s FTSE MIB -0.9%

Asia

  • Japan’s Nikkei +3.0%,
  • Hong Kong’s Hang Seng +1.2%,
  • China’s Shanghai Composite +0.3%

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 yields fell across the curve after bonds had gotten oversold on a short-term basis and should be a due for a bounce. A strong 20-yr note auction added some momentum to the effort along with a softer stock market and geopolitical nervousness. The 2s10s spread settled at 20 bps while the 5s30s spread narrowed to just 18 bps. 

  • 2-yr: -3 bps to 2.12%
  • 3-yr: -5 bps to 2.33%
  • 5-yr: -4 bps to 2.34%
  • 10-yr: -6 bps to 2.32%
  • 30-yr: -8 bps to 2.52%

Strong U.S. 20-year Treasury Bond Auction with High Yield of 2.651% – TRADERS COMMUNITY

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

  • MBA Mortgage Applications Index -8.1% wk/wk (prior -1.2%); Refinancing applications -14.0% wk/wk and -54.0% yr/yr; Purchase applications -2.0% wk/wk and -12.0% yr/yr
  • New home sales decreased 2.0% month-over-month in February to a seasonally adjusted annual rate of 772,000 units (Briefing.com consensus 820,000) from a downwardly revised 788,000 (from 801,000) in January. On a year-over-year basis, new home sales were down 6.2%.

Europe

  • Russia-Ukraine peace talks still continuing, but Ukraine President Zelenskyy describes them as confrontational
  • The U.S. and EU are reportedly set to announce new sanctions on Russia ahead of the NATO Summit
  • White House National Security Advisor Jake Sullivan says Russia war on Ukraine “will not end easily or rapidly”
  • Multiple Russian rocket attack caused “extensive” damage in Kyiv, according to NY Times
  • Secretary of State Anthony Blinken says US formally declares that Russia committed war crimes in Ukraine
  • NATO will increase troops in Bulgaria, Hungary, Romania and Slovakia, according to CNBC
  • FBI warns that Russia is considering cyber attacks on US energy sector
  • The U.S. and UK reached a deal that will end U.S. tariffs on steel and aluminum and UK tariffs on U.S. whiskey, motorcycles, and tobacco
  • UK’s February CPI +0.8% m/m (expected +0.6%; prior -0.1%) and +6.2% yr/yr (expected 5.9%; prior 5.5%); Core CPI +0.8% m/m (expected +0.5%; prior +0.4%) and +5.2% yr/yr (expected +5.0%; prior +4.4%)

Asia

  • Outgoing South Korean President Moon nominated IMF’s Rhee for Bank of Korea Governor position
  • Japan reportedly looking at additional stimulus package to help consumers with price increases

Looking ahead:

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!