Stock markets ignored the oil markets soaring to over $112 WTI and $115 Brent a Bond markets selling off and Fed chair Powell saying we are raising rates and we don’t know when inflation reverses with a war between Russia and Ukraine deepening. Another Bear Market rally or something more akin to BTFD. The Dow, S&P and Nasdaq all up for the 1st time in 3 days. The Russell 2000 led with a gain over 2.5%.
We look at the indices, Oil, $SWBI $WEAT $OXY $GPC Gold, Copper, BTC, ETH, Natgas in the podcast. We talk through to today’s action and where to now … This is a high-risk earnings season. …
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.
We look at the indices, Gold, Copper, BTC, ETH, Natgas, and oil in the podcast. De-risking may threaten progress that has been achieved on since the COVID bailout. It also has the potential to reverse some of the progress made in protecting downside risk if banks close or restrict access to money.
- April WTI crude oil (CLJ22) futures settled higher at $110.60, up $7.19 or 6.95%. High price reached $112.51. The low price extended $105.18. The high price today at the highest level since the week of May 2, 2011. Since a swing low on December 6 at $62.46, the price has risen 80.8% to the high price of $112.51. The swing low from the May 2, 2011 high at $114.79. Trade above that level and the price is trading at the highest level since 2008, when the price peaked at $147.27.
- April RBOB gasoline (RBJ22) closed up +21.96 (+7.11%)
- April Nymex natural gas (NGJ22) rose 18.9 cents to settle at $4.762/MMBtu. The May contract also gained 18.9 cents on Wednesday to close at $4.787.
- Benchmark gas prices in Europe soared more than 30% in Wednesday trading
- “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 rose +8.5% w/w to 11.8 bcf. On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.
Metals and FX
- The dollar index (DXY00) dipped 0.1% to 97.34.
- Gold futures settled $21.50 lower (-1.1%) to $1,922.
- March silver (SIH22) closed down -0.351 (-1.37%).
- Bitcoin CME March 22 -315 to 43925.0
For The Day
- Dow industrial average rose 596 points or 1.79% as 33891.36. The Dow all-time high close at 36952.65. For the week, -0.06%
- S&P index rose 80.26 points or 1.86% at 4386.53. The S&P all-time high close at 4818.62.
- NASDAQ index rose 219.57 points or 1.62% at 13752.03
- Russell 2000 rose 50.36 points or 2.51% at 2058.87
- CBOE Volatility Index fell 9.0% to 27.59.
- NYSE Adv 2286 Dec 897 Vol 1.1 bln
- Nasdaq Adv 2714 Dec 1525 Vol 5.2 bln
S&P 500 sector watch:
- 11 of the 11 S&P 500 sectors closed lower
- 29 of the 30 Dow components closed higher.
- Cyclical financials (+2.6%), energy (+2.2%), materials (+2.2%), industrials (+2.2%) & information technology sector (+2.2%). The communication services sector (+0.7%) underperformed on a relative basis.
Key Earnings Reviews
- salesforce.com (CRM 217.30, +8.41): +4.0% after beating top and bottom-line estimates and guiding revenue for Q1 and FY23 above consensus. That has outweighed downside EPS guidance for Q1 and FY23.
- Nordstrom (JWN 25.82, +6.28): +32.1% after beating EPS estimates and guiding FY23 EPS above consensus.
- Hewlett Packard Enterprises (HPE 16.25, +0.84): +5.5% after beating EPS estimates and guiding FY22 EPS mostly above consensus.
- Ross Stores (ROST 95.16, +5.61): +6.3% after beating top and bottom-line estimates and authorizing a $1.9 billion share repurchase program. Ross provided downside EPS guidance for fiscal Q1 and FY23.
US Markets YTD
- Dow Jones Industrial Average -6.7% YTD
- S&P 500 -8.0% YTD
- Russell 2000 -8.3% YTD
- Nasdaq Composite -12.1% YTD
Cboe Daily Market Ratios:
- German DAX, +0.9%
- France’s CAC +1.8%
- UK’s FTSE 100 +1.5%
- Spain’s Ibex +1.6%
- Italy’s FTSE MIB +1.1%
- Japan’s Nikkei: -1.7%
- Hong Kong’s Hang Seng: -1.8%
- China’s Shanghai Composite: -0.1%
- India’s Sensex: -1.4%
- South Korea’s Kospi: +0.2%
- Australia’s ASX All Ordinaries: +0.3%
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
Treasuries yields rose double-digit basis points after a two-day plunge. The 2-yr yield jumped 22 basis points to 1.52%, 10-yr yield jumped 16 basis points to 1.87%.
- 2-yr: -16 bps to 1.43%
- 3-yr: -16 bps to 1.61%
- 5-yr: -16 bps to 1.72%
- 10-yr: -15 bps to 1.84%
- 30-yr: -11 bps to 2.18%
- The fed funds futures market March FOMC meeting implied likelihood of a 50-bps hike fell to 6.6% from 24.0% on Friday and 65.7% two weeks ago.
- U.S. 30-year Treasury Bond Auction with High Yield of 2.340% Slapped by CPI and Bullard – TRADERS COMMUNITY
- Strong U.S. 10-year Treasury Bond Auction with High Yield of 1.904% – TRADERS COMMUNITY
- Strong U.S. 3-year Treasury Bond Auction with High Yield of 1.592% – TRADERS COMMUNITY
The probability for a half-point hike in March decreased to 50.2% from 93.8% yesterday, according to the CME FedWatch Tool.
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%.
- The weekly MBA Mortgage Index fell 0.7% to follow last week’s 13.1% decrease. The Purchase Index fell 1.8% while the Refinance Index increased 0.5%.
- The ADP Employment Change report estimated that 475,000 jobs were added to private sector payrolls in February (consensus 350,000). The increase in January was upwardly revised to 509,000 from -301,000.
- Around The Barrel – US Crude Oil Continues To Draw as WTI Trades To $112 Bbl – TRADERS COMMUNITY
- Eurozone’s February CPI 0.9% m/m (last 0.3%); 5.8% yr/yr (expected 5.3%; last 5.1%). February Core CPI 0.5% m/m (last -0.9%); 2.7% yr/yr (expected 2.5%; last 2.3%)
- Germany’s February Unemployment change -33,000 (expected -23,000; prior -48,000) and February Unemployment Rate 5.0% (expected 5.1%; last 5.1%)
- U.K.’s February Nationwide HPI 1.7% m/m (expected 0.6%; last 0.8%); 12.6% yr/yr (expected 10.7%; last 11.2%)
- France’s January government budget deficit EUR15.90 bln (last deficit of EUR170.70 bln)
- Spain’s February Unemployment Change -11,400 (expected -44,500; last 17,200)
- Japan’s Q4 Capital Spending 4.3% yr/yr (expected 2.9%; last 1.2%)
- South Korea’s January Industrial Production 0.2% m/m (expected -0.6%; last 3.7%); 4.3% yr/yr (expected 6.5%; last 7.4%). January Retail Sales -1.9% m/m (last 2.0%). February Nikkei Manufacturing PMI 53.8 (last 52.8)
- India’s February Nikkei Markit Manufacturing PMI 54.9 (expected 54.3; last 54.0)
- Australia’s Q4 GDP 3.4% qtr/qtr (expected -2.7%; last -1.9%); 4.2% yr/yr (expected 3.0%; last 4.0%)
- New Zealand’s January Building Consents -9.2% m/m (last 0.6%)
- South Korea’s Yoon Suk-yeol maintains a lead in the polls ahead of next Wednesday’s presidential election.
- South Korea’s Manufacturing PMI expanded for the 17th consecutive month with the Index reaching its highest level since June.
- Shanghai banks are reportedly slightly lowering mortgage rates for first and second homes.
- Chinese press reported that the production of soybeans will be increased sharply.
- Taiwan’s President Tsai praised the visit of a U.S. delegation, saying that it shows rock solid ties
- The Week Ahead:
- Monday: January advance goods trade deficit (prior -$101.00 bln), advance Wholesale Inventories (prior 2.1%), and advance Retail Inventories (prior 4.4%) at 8:30 ET; and February Chicago PMI (prior 65.2) at 9:45 ET
- Tuesday: January Construction Spending (prior 0.2%) and February ISM Manufacturing Index (prior 57.6%) at 10:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -13.1%) at 7:00 ET; February ADP Employment Change (prior -301,000) at 8:15 ET; and weekly crude oil inventories (prior +4.52 mln) at 10:30 ET
- Thursday: Weekly Initial Claims (prior 232,000), Continuing Claims (prior 1.476 mln), revised Q4 Productivity (prior 6.6%), and revised Q4 Unit Labor Costs (prior 0.3%) at 8:30 ET; January Factory Orders (prior -0.4%) and February ISM Non-Manufacturing Index (prior 59.9%) at 10:00 ET; and weekly natural gas inventories (prior -129 bcf) at 10:30 ET
- Friday: February Nonfarm Payrolls (prior 467,000), Nonfarm Private Payrolls (prior 444,000), Average Hourly Earnings (prior 0.7%), Unemployment Rate (prior 4.0%), and Average Workweek (prior 34.5) at 8:30 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!