Market Wrap – Netflix and Natural Gas Remind Longs of Dribbler Risk April 19, 2022

US stocks reversed early selling to close solidly higher with the NASDAQ leading. However, after hours Netflix got wrecked after hours losing over 20% on earnings worse than expected (with net subscribers negative at -200 K and forecasts of -2 million in the next quarter). Natural gas futures were also wrecked after falling from over $8 to under $7 in a session. We always warn dribblers be wary of what you trade, and Natural gas is one to stay away when the punters and dribblers are all one way. $NFLX representative of the tech wreck that crushed the Dribblers.

We look at the indices, $AAPL $NFLX $SEV $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

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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 market.


Market Closes

Energy

  • Crude Oil Futures 102.63 -5.58 -5.16%
  • Brent Crude Futures 107.40 0.15 0.14%
  • Gold Futures 1952.20 -34.20 -1.72%
  • Silver Futures 25.290 -0.860 -3.29%
  • Natural Gas Futures 7.256 -0.564 -7.21%
  • Unleaded Gasoline Futures 3.2470 -0.1311 -3.88%
  • WTI off the high price of $129.44. The highest in 2008 was $147.27.
  • 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.”
  • Weather forecasts shifted back a little warmer, “more appropriately, less cool,’” according to Bespoke Weather Services who said models backed off the level of cooling in the eastern half of the nation at the end of April and early May. In total, four gas-weighted degree days (GWDD) were dropped from the 15-day forecast, The pattern, though, still holds onto its overall cooler-than-normal tilt.
  • BNEF data showed gas flows to U.S. export terminals Tuesday rose by +10.7% w/w to 12.8 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 up 0.2% to 100.96, recording its fourth consecutive gain.
  • Gold Futures 1952.20 -34.20 -1.72%
  • Silver Futures 25.290 -0.860 -3.29%
  • Copper Futures 4.6980 -0.1040 -2.17%
  • Corn Futures 799.00 -8.00 -0.99%
  • Wheat Futures 1105.75 -23.00 -2.04%
  • Bloomberg Commodity Index 131.32 -3.67 -2.72%

Stocks

S&P 500 sector watch:

  • Dow Jones closed up 499.5 points or 1.45% at 34911.19
  • S&P rose 70.52 points or 1.61% at 4462.22
  • NASDAQ index rose 287.31 points or 2.15% at 13619.67
  • Russell 2000 rose 40.63 points or 2.04% at 2030.76
  • 10 of the 11 S&P 500 sectors closed positive
  • From 0.6% (utilities) to 2.9% (consumer discretionary).
  • Exception was energy sector (-1.0%) amid pronounced weakness in oil ($102.07/bbl, -6.11, -5.7%) and natural gas ($7.17/MMBtu, -0.63, -8.0%) prices. 
  • The broader gains helped the benchmark index close back above its 50-day moving average (4416) after a flat open. 

Key After Hours


US Markets YTD

  • Dow Jones Industrial Average -3.9% YTD
  • S&P 500 -6.4% YTD
  • Russell 2000 -9.6% YTD
  • Nasdaq Composite -13.0% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • UK: FTSE 100 7601.28 -15.10 -0.20%
  • Germany: DAX 14153.46 -10.39 -0.07%
  • France: CAC 40 6534.79 -54.56 -0.83%
  • Italy: FTSE MIB 24624.41 -237.94 -0.96%
  • Spain: IBEX 35 8694.00 -5.00 -0.06%
  • Stoxx Europe 600 456.28 -3.54 -0.77%

Asia

  • Japan’s Nikkei: +0.7%
  • Hong Kong’s Hang Seng: -2.3%
  • China’s Shanghai Composite: -0.1%
  • India’s Sensex: -1.2%
  • South Korea’s Kospi: +1.0%
  • Australia’s ASX All Ordinaries: +0.6%.

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 pulled back Tuesday with shorter tenors finishing behind longer tenors despite showing relative strength at the start. The 5-yr note and shorter tenors started the day near their flat lines while 10s and 30s underperformed from the start, making for an extension of yesterday’s slide to fresh multi-year lows. Today’s retreat lifted the 5-yr yield to a fresh high for the year while yields on 3s and 2s are on the verge of doing the same.

  • 2-yr: +11 bps to 2.58%
  • 3-yr: +10 bps to 2.80%
  • 5-yr: +9 bps to 2.90%
  • 10-yr: +5 bps to 2.91%
  • 30-yr: +4 bps to 2.99%

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

  • St. Louis Fed President (FOMC voter) Bullard said that while a 75-bps rate hike is not outside the realm of possibilities, he doesn’t expect such a big increase to take place.
  • Later in the day, Chicago Fed President (non-voter) Evans said that he doesn’t see the need for rate hikes of more than 50 bps.
  • Housing starts increased 0.3% month-over-month in March to a seasonally adjusted annual rate of 1.793 million units (consensus 1.750 million) while permits increased 0.4% month-over-month to a seasonally adjusted annual rate of 1.873 million.

Pre-Market

  • Johnson & Johnson (JNJ 176.95, -0.71): -0.4% after lowering its FY22 EPS guidance below consensus. JNJ beat EPS estimates.
  • Travelers (TRV 181.75, -3.47): -1.9% despite beating top and bottom-line estimates. TRV also raised its quarterly dividend by 6%.
  • Lockheed Martin (LMT 460.06, -7.38): -1.6% after reporting mixed earnings results, beating EPS estimates on below-consensus revenue.
  • J.B. Hunt Transport (JBHT 174.99, +3.54): +2.1% after beating top and bottom-line estimates.
  • American Campus Communities (ACC 65.00, +7.42): +12.9% after agreeing to be acquired by Blackstone (BX 112.73, +0.74, +0.7%) in a $12.8 billion deal, according to The Wall Street Journal.

Europe

  • French Finance Minister Le Maire said that an embargo on Russian oil is in the works.
  • Stellantis will suspend its operations in Russia.
  • British energy suppliers expect that the number of customers looking to pay their bills over time will increase by about 50% this year.

Asia

  • Japan’s February Industrial Production 2.0% m/m (last 0.1%) and Capacity Utilization 1.5% m/m (last -3.6%)
  • Australia’s March New Home Sales 3.9% m/m (last -7.0%)
  • Toyota expects that global production between May and July will average about 800,000 units per month, down from a recent rate of 840,000 per month.
  • Chinese lenders are reportedly being encouraged to cut deposit rates.
  • Xinhua speculated that China’s CPI will only grow “modestly” in Q2 and Q3.
  • The Minutes from the last Reserve Bank of Australia policy meeting noted that certain developments have pulled forward the timing of the initial rate hike.
  • The Japanese yen has weakened to a 20-year low against the dollar.

Looking ahead:

  • The Day Ahead:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.3%)
  • 8:30 ET: March Existing Home Sales (Briefing.com consensus 5.80 mln; prior 6.02 mln)
  • 10:30 ET: Weekly crude oil inventories (prior +9.38 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!