Oil after yesterday’s violent session sold off to near yesterday’s lows, about $10 from day highs. Stock markets gave back modestly. S&P 500 declined 0.4%, Dow Jones Industrial Average (-0.3%) and Russell 2000 (-0.2%) fell modestly while the Nasdaq Composite (-1.0%) underperformed. Yesterday’s optimism blew back in bull’s faces it seems after a breakdown in ceasefire talks between Russia and Ukraine, CPI data for February and 10-yr yields reached 2.01% (+6 bps today).
After hours RIVN and ORCL sold off they reported worse than expected earnings. This is a high-risk earnings season. Another Bear Market rally or something more after initially soaring on BTFD.
We look at the indices, $AAPL, $AMZN, Gold, Copper, BTC, ETH, Natgas and oil in the podcast.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
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.
- April WTI crude oil (CLJ22) futures settled lower by $2.59 (-2.4%) to $106.29/bbl after yesterday down exactly $15 or 12.1%, to $108.70. The largest percentage decline since November, when the omicron scares first hit.
- Off the high price of $129.44. The highest in 2008 was $147.27.
- April RBOB gasoline (RBJ22) closed down -13.71 (-4.16%).
- April Nymex natural gas (NGJ22) advanced for the first time in four sessions this week, settled at $4.631/MMBtu, up 10.5 cents day/day. May gained 10.8 cents to $4.669.
- Temperatures were expected to warm quickly next week, bringing highs in the 60s to parts of the northern United States and highs in the 70s to 80s in the South, likely crimping heating demand notably.
- “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 Thursday rose +21% y/y to 12.5 bcf. On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.
Commodities and FX
- The U.S. Dollar Index bounced off a one-week low, rising 0.5% to 98.49.
- Gold futures settled $12.20 higher (+0.6%) to $2,000.40/oz. $2,043.30/oz this week was the highest level since the week of August 10, 2020. The high price in 2020 reached $2075.14.
- May silver (SIK22) closed up +0.440 (+1.70%).
- 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.
For The Day
- Dow industrial average -112.20 points or -0.34% at 33174.08
- S&P index -18.36 points or -0.43% at 4259.51
- NASDAQ index -125.57 points or -0.95% at 13129.97
- Russell 2000-4.61 points or -0.23% at 2011.67
S&P 500 sector watch:
- 6 of the 11 S&P 500 sectors closed lower
- Information technology sector (-1.8%), energy (+3.1%) and consumer discretionary (+1.2%) sectors rose 3% and 1%, respectively.
- The consumer discretionary sector, large part of its outperformance to Amazon (AMZN 2936.35, +150.77, +5.4%), after announcing a 20-for-1 stock split and a $10 billion share repurchase authorization.
Key Earnings Reviews
US Markets YTD
- Dow Jones Industrial Average -8.7% YTD
- Russell 2000 -10.4% YTD
- S&P 500 -10.6% YTD
- Nasdaq Composite -16.1% YTD
Cboe Daily Market Ratios:
- Major European indices closed sharply lower, giving back a good chunk of yesterday’s gains.
- Germany’s DAX fell 2.9%,
- UK’s FTSE fell 1.2%,
- France’s CAC fell 2.8%.
- Italy MIB -4.1%
- Spain IBEX -1.3%
- Europe Stoxx 600 declined 1.8%.
- Japan’s Nikkei: +1.0%
- Hong Kong’s Hang Seng: -0.7%
- China’s Shanghai Composite: -1.1%
- India’s Sensex: +2.3%
- South Korea’s Kospi: CLOSED
- Australia’s ASX All Ordinaries: +1.1%.
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
U.S. Treasuries retreated for the fourth consecutive day on Thursday. Longer tenors pacing the slide. The market bounced off lows after the completion of today’s $20 bln 30-yr bond reopening, which was met with much stronger demand than Tuesday’s sale of 3-yr notes and yesterday’s reopening of 10-yr notes. The 2-yr yield reached its highest level since September 2019 while yields on the 5-yr note and the 10-yr note finished the day just below their February highs.
- 2-yr: +5 bps to 1.72%
- 3-yr: +5 bps to 1.90%
- 5-yr: +6 bps to 1.94%
- 10-yr: +6 bps to 2.01%
- 30-yr: +9 bps to 2.39%
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%.
- Solid U.S. 30-year Treasury Bond Auction with High Yield of 2.375% Follows Screeching CPI – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Draw of -124 Bcf in Storage – TRADERS COMMUNITY
- Inflation Surging Higher in February US CPI +7.9% y/y largest Increase in Forty Years – TRADERS COMMUNITY
- ECB Leaves Rates Unchanged as Expected, Commitment to End Bond Purchases in Q3 2022 – TRADERS COMMUNITY
- The weekly initial claims report showed an 11,000 increase in jobless claims to 227,000 (Briefing.com consensus 220,000) for the week ending March 5. Continuing claims for the week ending February 26 increased by 25,000 to 1.494 million.The key takeaway from the report is that the level of jobless claims is still consistent with a tight labor market.
- The Treasury Budget showed a $216.6 bln deficit in February versus a $310.9 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the February deficit cannot be compared to the January surplus of $118.7 bln. The budget deficit over the last 12 months is $2.20 trln versus a deficit of $2.30 trln in January.
- Nickel trading at the London Metal Exchange will remain suspended tomorrow.
- The European Central Bank made no changes to its interest rate corridor but announced that its asset purchase program will be wound down at a faster rate.
- Goldman Sachs (GS) and JPMorgan Chase (JPM) ending operations in Russia.
- Spain’s budget minister said that taxes on fuel will be cut if there is no action at the EU level.
- Italy’s January PPI was up 9.7% m/m (last 1.1%) and up 32.9% yr/yr (last 22.8%).
- Reserve Bank of Australia Deputy Governor Debelle resigned, effective next week.
- Japan’s Prime Minister Kishida said that a “widespread” effect is being seen from rising prices and that a coordinated government response is needed.
- Australia is planning to increase defense spending.
- Japan’s February PPI was up 0.8% m/m (expected 0.6%; last 0.8%) and up 9.3% yr/yr (expected 8.7%; last 8.9%).
- Australia’s January Building Approvals fell 27.9% m/m, as expected (last 8.2%) and Pending House Approvals fell 17.5% m/m, as expected (last -1.8%).
- 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!