Market Wrap – No Fear for Market Bottom Pickers, Oil Bounces Hard May 19, 2022

Markets ran at two speeds today the consumer staples sector (-1.5%) was down the most, Phillip Morris International (PM 100.1, -6.10, -5.8%). Continued bleeding in Walmart (WMT 119.07, -3.41, -2.8%) and Target (TGT 153.43, -8.18, -5.1%) Small cap stocks saw some bids and rallies as the speculative end of the market continues to be influenced by FOMO despite the risk. The Russell 2000 (+0.1%) closed slightly higher with the other indices lower. Crude Oil Futures bounced hard from a low of $103.24 the July WTI closed up $2.87 to $109.96 with the June contract expiring tomorrow.

We look at the indices, $AAPL $TSLA $TGT $AMZN Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through to today’s action and where to now …

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

Energy

  • Crude Oil Futures settled July up $2.87 to $109.96, The low $103.24 giving a $6.72 bounce, breaking a two-day decline. WTI June contract expires tomorrow.
  • WTI off the high price of $129.44. The highest in 2008 was $147.27.
  • Brent Crude Futures 111.66 -0.38 -0.34
  • Natural Gas Futures 8.195 -0.260 -3.08
  • Unleaded Gasoline Futures 3.8170 0.0964 2.59
  • 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 fell 0.9% to 102.86.
  • Gold futures settled $25.30 higher (+1.4%) to $1,841.20/oz,
  • Silver Futures 21.935 0.391 1.81
  • Copper Futures 4.2770 0.0985 2.36
  • Corn Futures 782.25 0.75 0.10
  • Wheat Futures 1202.25 -28.50 -2.32
  • Bloomberg Commodity Index 131.11 1.48 1.14
  • Bitcoin USD 30360 146 0.48
  • Ethereum USD 2015.42 4.04 0.20
  • Ripple USD 0.4179 -0.0008 -0.19

Stocks

US Indices & S&P 500 sector watch:

  • DJIA 31253.13 -236.94 -0.75
  • Nasdaq Composite 11388.50 -29.66 -0.26
  • S&P 500 3900.79 -22.89 -0.58
  • Russell 2000 1776.22 1.38 0.08
  • NYSE Composite 15035.87 -8.65 -0.06
  • CBOE Volatility 29.35 -1.61 -5.20
  • NYSE Adv 1608 Dec 1494 Vol 1.1 bln
  • Nasdaq Adv 2280 Dec 1890 Vol 5.1 bln
  • Eight of the 11 S&P 500 sectors closed lower. The consumer staples (-2.0%), information technology (-1.1%), and industrials (-0.9%) sectors were the weakest performers,
  • Materials (+0.7%), consumer discretionary (+0.1%), and health care (+0.2%) sectors eked out gains.

Key After Hours

  • Applied Materials (AMAT) misses by $0.05, misses on revs; guides JulQ EPS below consensus, revs below consensus… AMAT down 3.1%
  • Deckers Outdoor (DECK) beats by $1.19, beats on revs; guides FY23 EPS in-line, revs above consensus… DECK up 12.9%
  • DoorDash (DASH) in filing announces authorization of $400 mln common stock repurchase program… DASH up 1.1%
  • Foghorn Therapeutics (FHTX) provides update on Phase 1 study of FHD-286 in relapsed and/or refractory AML and MDS; FDA initiates partial clinical hold… FHTX down 25.9%
  • Palo Alto Networks (PANW) beats by $0.11, beats on revs; guides Q4 EPS above consensus, revs above consensus… PANW up 10.5%
  • Ross Stores (ROST) misses by $0.03, misses on revs, comps -7%; guides Q2 EPS below consensus; guides FY23 EPS below consensus… ROST down 21.6%
  • V.F. Corp (VFC) misses by $0.02, reports revs in-line; guides FY23 revs in-line… VFC up 4.2%

US Markets YTD

  • Dow Jones Industrial Average -10.1% YTD
  • S&P 500 -14.2% YTD
  • Russell 2000 -18.0% YTD
  • Nasdaq Composite -23.4% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

Index – Last – Chg – % Chg

European stock indexes closed off the lows of the day after relentless selling subsided.

  • German DAX -1.0%
  • FTSE 100 -2.0%
  • Stoxx 600 -1.5%
  • Italy MIB -0.1%
  • Spain IBEX -0.9%

Asia

  • Japan’s Nikkei: -1.9%
  • Hong Kong’s Hang Seng: -2.5%
  • China’s Shanghai Composite: +0.4%
  • India’s Sensex: -2.6%
  • South Korea’s Kospi: -1.3%
  • Australia’s ASX All Ordinaries: -1.7%

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 demand drove yields lower across the curve. The 2-yr yield declined seven basis points to 2.61%, and the 10-yr yield declined three basis points to 2.86% after touching 2.78% in the wake of the weekly claims and Philadelphia Fed Index releases. 

  • 2-yr: -7 bps to 2.61%
  • 3-yr: -3 bps to 2.79%
  • 5-yr: -4 bps to 2.85%
  • 10-yr: -3 bps to 2.86%
  • 30-yr: -1 bp to 3.07%

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

Market Notables

  • Spirit Airlines (SAVE 19.27, +2.29, +13.5%) rallied 13.5% after JetBlue (JBLU 9.45, -0.61, -6.1%) officially commenced a hostile takeover bid for the company. 
  • Wix.com (WIX 66.68, -4.51, -6.3%) and Warby Parker (WRBY 16.51, -0.93, -5.3%) provided disappointing earnings news. 

USA

Europe

  • British Prime Minister Johnson is reportedly blocking efforts to impose a windfall tax on energy companies.
  • German Chancellor Scholz said that his country will strengthen its defense capabilities.
  • U.K.’s May CBI Industrial Trends Orders rose to 26 from 14.

Asia

  • Shanghai’s vice mayor said that the city’s port has resumed most work.
  • Japan’s ruling coalition is reportedly considering a higher corporate tax rate.
  • There was speculation that North Korea will conduct another missile test when President Biden visits South Korea and Japan in the coming days.
  • Japan’s April trade deficit reached JPY839.20 bln (expected deficit of JPY1.15 trln; last deficit of JPY414.10 bln) as imports grew 28.2% yr/yr (expected 35.0%; last 31.2%) and exports grew 12.5% yr/yr (expected 13.8%; last 14.7%). March Core Machinery Orders rose 7.1% m/m (expected 3.7%; last -9.8%), increasing 7.6% yr/yr (expected 3.7%; last 4.3%).
  • Australia’s April employment increased by 4,000 (expected 30,000; last 17,900) and full employment increased by 92,400 (last 20,000). April Unemployment Rate remained at 3.9%, as expected, and Participation Rate dipped to 66.3% from 66.4% (expected 66.4%).
  • New Zealand’s Q1 Input PPI was up 3.6% qtr/qtr (last 1.2%) and Output PPI was up 2.6% qtr/qtr (last 1.4%).
  • Hong Kong’s April Unemployment Rate rose to 5.4% from 5.0%. · Eurozone’s March Current Account deficit reached EUR1.60 bln (last surplus of EUR20.80 bln). March Construction Output 0.00% m/m (last 1.06%)

Looking ahead:

The Day Ahead:

  • Traders Market Weekly: Eyes Up on Retail and Inflation – TRADERS COMMUNITY
  • Monday: May Empire State Manufacturing Survey (prior 24.6) at 8:30 ET and March net long-term TIC flows (prior $141.7 bln) at 16:00 ET
  • Tuesday: April Retail Sales (prior 0.5%) and Core Retail Sales (prior 1.1%) at 8:30 ET; April Industrial Production (prior 0.9%) and Capacity Utilization (prior 0.9%) at 9:15 ET; March Business Inventories (prior 1.5%) and May NAHB Housing Market Index (prior 77) at 10:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 2.0%) at 7:00 ET; April Housing Starts (prior 1.793 mln) and Building Permits (prior 1.873 mln) at 8:30 ET; weekly crude oil inventories (prior +8.49 mln) at 10:30 ET; and $17 bln 20-yr Treasury bond auction results at 13:00 ET
  • Thursday: Weekly Initial Claims (prior 203,000), Continuing Claims (prior 1.343 mln), May Philadelphia Fed Survey (prior 17.6) at 8:30 ET; April Existing Home Sales (prior 5.77 mln) and April Leading Indicators (prior 0.3%) at 10:00 ET; and weekly natural gas inventories (prior +76 bcf) at 10:30 ET
  • Friday: Nothing of note

FEDERAL RESERVE CHAIR JEROME POWELL

Tuesday, May 17

NEW YORK – Federal Reserve Chair Jerome Powell participates in conversation before the Wall Street Journal Future of Everything Festival, 1400 EDT/1800 GMT. No text. Q&A from moderator. Livestream at www.wsj.com. Spring Studios, 6 St. Johns Lane. Contact: Caitlyn Reuss, caitlyn.reuss@dowjones.com or 757 642 4267

OTHER FED OFFICIALS

Monday, May 16

NEW YORK – Federal Reserve Bank of New York President John Williams participates in in moderated discussion before the Mortgage Bankers Association Secondary and Capital Markets Conference and Expo, 0855 EDT/1255 GMT. No livestream. No text. Moderated Q&A expected. New York Marriott Marquis, 1535 Broadway, Broadway Ballroom, 6th floor. RSVP: Adam DeSanctis, adesanctis https://www.mba.org/conferences-and-education/secondary-and-capital-markets-conference-and-expo/schedule/session-detail/opening-general-session-economic-outlook-from-the-new-york-fed-74963

Tuesday, May 17

NEWARK, Del. – Federal Reserve Bank of Philadelphia President Patrick Harker speaks on “Healthcare as an Economic Driver” before hybrid Stern Future Healthcare Workforce Summit, 0915 EDT/1315 GMT. Text available. Audience Q&A expected. No media Q&A. Virtual and in-person at the University of Delaware, The Tower at STAR, 4th Floor, 100 Discovery Blvd. RSVP: Daneil Mazone, daniel.mazone Alyssa Augustine, alyssa.augustine@mpls.frb.org or 612 508 6341

CLEVELAND – Federal Reserve Bank of Cleveland President Loretta Mester gives opening remarks before virtual “Cleveland Fed Conversations on Central Banking, Inflation and Monetary Policy: Parallels to and Differences from the 1970s” panel, 1430 EDT/1830 GMT. Via teleconference. No audience Q&A. No media Q&A. No text. RSVP for teleconference link: https://us02web.zoom.us/meeting/register/tZMldemoqjksG9BQdTj_4YEa0gZuBh7o3yFP. Information: Andrew Zajac, 216 579 3196 or andrew.zajac@clev.frb.org

NEW YORK – Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions or monetary policy before the Money Marketeers of New York University, 1845 EDT/2245 GMT. No livestream planned. Embargoed text available. Audience Q&A and media scrum expected. Dial-in access to media scrum available for media not in attendance. RSVP: Gloria Nixon, glorianixon@moneymarketeers.org

Wednesday, May 18

PHILADELPHIA – Federal Reserve Bank of Philadelphia President Patrick Harker speaks on the economic outlook before virtual Mid-Size Bank Coalition of America CEO Talk, 1600 EDT/2000 GMT. Text available. Audience Q&A expected. No media Q&A. RSVP: Daneil Mazone, daniel.mazone@phil.frb.org

Thursday, May 19 ***MINNEAPOLIS – Federal Reserve Bank of Minneapolis President Neel Kashkari participates in Urban Institute virtual conversation, “Inflation and its Consequences for Families with Low and Moderate Incomes,” 1500 CDT/1600 EDT/2000 GMT. No Q&A. RSVP online: https://www.urban.org/events/inflation-and-its-consequences-families-low-and-moderate-incomes. Contact: Alyssa Augustine, alyssa.augustine@mpls.frb.org or 612 508 6341

Monday, May 23

ATLANTA – Federal Reserve Bank of Atlanta President Raphael Bostic participates in conversation on the economic outlook before an Atlanta Rotary event, 1200 EDT/1600 GMT. No livestream. Audience and media Q&As expected. No embargoed text. Loudermilk Conference Center, 40 Courtland Street. RSVP to attend: media Karen Mracek, karen.mracek@atl.frb.org

Earnings:

Earnings:
Monday (May 16)
Pre-Market: YOU CGEN MNDY TSEM WRBY WEBR WIX
After-Hours: CCSI GAN GLBE SHLS SSYS TTWO TME
Tuesday (May 17)
Pre-Market: AER HD HUYA IHS JD ONON RSKD SE WMT
After-Hours: AGYS DLO DOCS KEYS NXGN
Wednesday (May 18)
Pre-Market: ADI DOYU DT LOW TGT TJX TGI
After-Hours: BBWI CSCO CPRT GDS SNPS
Thursday (May 19)
Pre-Market: WMS BJ CAE GOOS EXP KSS LSPD MNRO VIPS
After-Hours: AINV AMAT DECK FLO GLOB PANW ROST VFC
Friday (May 20)
Pre-Market: BAH DE FL
After-Hours: None

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!