Back from July 4th celebrations we were greeted by global growth worries. The euro being smashed lower to levels not seen since 2002 as parity chants grow louder. Germany is being rocked by the Energy crisis and its reliance on cheap Russian gas. German gas giant Uniper SE is in talks with the government over a potential bailout package of as much as 9 billion euros Bloomberg reports. Commodity prices continued to get pounded from the speculative highs, Wheat, Corn and Soybeans all lower. WTI crude oil broke that Kijun and dumped 8.1% to $99.34/bbl, unleaded gasoline futures dropped 9.0% to $3.34/gal, and copper futures fell 5.6% to $3.42/lb. Gold fell $43 to $1766.
US 10-year yields down 7.1 bps to 2.83%. The 2s10s spread inverted by a basis point. The 2-yr note yield settled down a basis point at 2.82% and the 10-yr note yield settled down eight basis points at 2.81%. Separately, WTI crude futures plummeted 8.1% to $99.34/bbl, unleaded gasoline futures dropped 9.0% to $3.34/gal, and copper futures fell 5.6% to $3.42/lb. The Dow, Nasdaq, and S&P 500 all reversed hard, from down 2.4%, 1.9%, and 2.2%, respectively. The Nasdaq would ultimately close up 1.8%, S&P 500 up 0.2% gain and the Dow Jones Industrial Average settled a modest 0.4% decline.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
This week we have inflation data and more Central Bank action as a result yields, energy prices and the EURUSD USDJPY are in focus.
We talk through to today’s action and where to now ….
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.
- WTI Crude Oil Futures $99.50/bbl, down $8.93, -8.24%
- Brent Crude Futures $102.77/bbl, down $10.73 or -9.45%
- Natural Gas Futures $5.5230/MMBtu -4.66%
- Unleaded Gasoline Futures $3.35 -9.18%
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels
- 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 climbed up1.5% to $106.66.
- Gold futures settled $37.60 lower (-2.1%) to 1,763.90/oz, pressured by a surging dollar.
- July wheat futures down 37 1/2 cents, closing at $7.93 3/4
- Nov soybean futures down 79 1/4 cents, closing at $13.16
- Dec corn futures down 29 cents, closing at $5.78 1/2
- Bloomberg Commodity Index 111.87 -5.26 -49.
- Bitcoin USD 20294 -165 -0.81
- Ethereum USD 1143.68 -10.66 -0.92
- Ripple USD 0.3249 -0.0002 -0.05
US Indices & S&P 500 sector watch:
- DJIA 30967.82 -129.44 -0.42%
- Nasdaq Composite 11322.24 194.39 1.75%
- S&P 500 3831.39 6.06 0.16%
- Russell 2000 1741.33 13.57 0.79%
- NYSE Composite 14499.49 -137.26 -0.94%
- CBOE Volatility 27.54 0.84 3.15%
- NYSE Adv 1424 Dec 1833 Vol 1.21 bln
- Nasdaq Adv 2716 Dec 1954 Vol 4.96 bln
- Top S&P 500 sectors; communication services (+2.7%), consumer discretionary (+2.3%), and information technology (+1.2%) sectors
- Today’s worst-performing sectors were energy (-4.0%), utilities (-3.4%), materials (-2.0%), and industrials (-1.5%).
- The Vanguard Mega-Cap Growth ETF (MGK) ended the day up 1.8%, whereas the Invesco S&P 500 Equal Weight ETF (RSP) closed down 0.3%
Chipmakers had an even worse showing than the tech sector, as the PHLX Semiconductor Index fell 6.2%.
Market Pre-Market Notables
- Occidental Petroleum (OXY 60.91, +0.47, +0.8%): 10% owner Berkshire Hathaway (Warren Buffett) bought 9,887,040 shares worth ~$582.4mln
- Cowen Group (COWN 27.78, +3.74, +15.6%): Toronto-Dominion Bank (TD) is considering possible bid for COWN, according to Bloomberg
- Tesla (TSLA 674.06, -7.73, -1.1%): In the second quarter, co produced over 258,000 vehicles and delivered over 254,000 vehicles; June 2022 was the highest vehicle production month in Tesla’s history
US Markets YTD
- Dow Jones Industrial Average: -14.8% YTD
- S&P 400: -19.4% YTD
- S&P 500: -19.6% YTD
- Russell 2000: -22.5% YTD
- Nasdaq Composite: -27.6% YTD
Key After Hours
- Kornit Digital (KRNT): issues downside Q2 revenue guidance, citing macro-related headwinds that meaningfully accelerated in the last few weeks of the quarter.. KRNT down 21.6%
- Life Storage (LSI) increases quarterly dividend by 8% to $1.08/sh from $1/00/sh; new annual yield is 3.8%… LSI up 1.2%
- Sarepta Therapeutics (SRPT) to Share New Clinical Data and Integrated Analysis for SRP-9001, its Investigational Gene Therapy for the Treatment of Duchenne Muscular Dystrophy on July 6, 2022 at 8:30am ET… SRPT up 0.8%
- STAG Industrial (STAG) appoints William Crooker as CEO and to the Board of Directors… STAG up 2.8%
Cboe Daily Market Ratios:
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
U.S. Treasuries 2s10s spread inverted by a basis point. The 2-yr note yield settled down a basis point at 2.82% and the 10-yr note yield settled down eight basis points at 2.81%.
- 2-yr: -1 bp to 2.82%
- 3-yr: -3 bps to 2.82%
- 5-yr: -7 bps to 2.82%
- 10-yr: -8 bps to 2.81%
- 30-yr: -8 bps to 3.03%
- Factory orders for manufactured goods increased 1.6% m/m in May (consensus +0.5%) following an upwardly revised 0.7% increase (from 0.3%) in April. Shipments of manufactured goods rose 1.8% after increasing 0.6% in April.
Index – Last – Chg – % Chg
- UK: FTSE 100 7025.47 -207.18 -2.86
- Germany: DAX 12401.20 -372.18 -2.91
- France: CAC 40 5794.96 -159.69 -2.68
- Italy: FTSE MIB 20705.06 -638.87 -2.99
- Spain: IBEX 35 7959.40 -202.40 -2.48
- Stoxx Europe 600 400.68 -8.63 -2.11
- Switzerland: Swiss Market 10702.50 -179.47 -1.65
- Dutch farmer protests against stricter environmental rules grew over the weekend.
- Norwegian oil and gas workers went on strike, demanding higher pay.
- NATO allies signed accession protocols for Finland and Sweden.
- European Central Bank policymaker De Guindos said that the size of the September rate hike will depend on the updated medium-term inflation outlook.
- Eurozone’s June Services PMI 53.0 (expected 52.8; last 56.1)
- Germany’s June Services PMI 52.4, as expected (last 55.0)
- U.K.’s June Services PMI 54.3 (expected 53.4; last 53.4)
- France’s June Services PMI 53.9 (expected 54.4; last 55.0). May Industrial Production 0.0% m/m (expected 0.2%; last -0.3%)
- Italy’s June Services PMI 51.6 (expected 51.5; last 53.7)
- Spain’s June Services PMI 54.0 (expected 53.5; last 56.5)
Index – Last – Chg – % Chg
- Japan’s Nikkei: +1.0%
- Hong Kong’s Hang Seng: +0.1%
- China’s Shanghai Composite: UNCH
- India’s Sensex: -0.2%
- South Korea’s Kospi: +1.8%
- Australia’s ASX All Ordinaries: +0.3%
- China’s June Caixin Services PMI 54.5 (expected 49.7; last 41.4)
- Japan’s June Services PMI 54.0 (last 54.2). May Overtime Pay 5.5% yr/yr (last 5.9%). May Overall Wage Income 1.0% (last 1.3%)
- South Korea’s June CPI 0.6% m/m (expected 0.5%; last 0.7%); 6.0% yr/yr (expected 5.9%; last 5.4%)
- India’s June Nikkei Services PMI 59.2 (expected 58.7; last 58.9)
- Singapore’s May Retail Sales 1.8% m/m (last 1.1%); 17.8% yr/yr (last 12.1%)
- Australia’s June AIG Construction Index 46.2 (last 50.4) and June Services PMI 52.6 (last 53.2). May Retail Sales 0.9% m/m, as expected (last 0.9%)
- New Zealand’s Q2 NZIER Business Confidence -65% (last -40%)
- A former Bank of Japan chief economist said that he expects the BoJ to increase its inflation forecast and maintain ultra-loose policy.
- South Korea’s CPI increased at its fastest yr/yr pace since late 1998 in the June reading.
- The Biden administration is expected to reverse tariffs on imports from China.
- The Reserve Bank of Australia raised its cash rate by 50 bps to 1.35%, as expected.
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.
- Traders Market Weekly: The Fed’s Fight Against Inflation – TRADERS COMMUNITY
- Monday: Nothing of note
- Tuesday: May NFIB Small Business Optimism Index (prior 93.2) at 6:00 ET; May PPI (prior 0.4%) and Core PPI (prior 0.5%) at 8:30 ET
- Wednesday: Weekly MBA Mortgage Index (prior -6.5%) at 7:00 ET; May Retail Sales (prior 0.9%), Retail Sales ex-auto (prior 0.6%), May Import/Export Prices, and June Empire State Manufacturing (prior -11.6) at 8:30 ET; April Business Inventories (prior 2.0%) and June NAHB Housing Market Index (prior 69) at 10:00 ET; weekly crude oil inventories (prior +2.03 mln) at 10:30 ET; June FOMC Rate Decision (prior 0.75-1.00%) at 14:00 ET; and April net Long-Term TIC Flows (prior $23.10 bln) at 16:00 ET
- Thursday: Weekly Initial Claims (prior 229,000), Continuing Claims (prior 1.306 mln), May Housing Starts (prior 1.724 mln) and Building Permits (prior 1.819 mln), and June Philadelphia Fed Survey (prior 2.6) at 8:30 ET; and weekly natural gas inventories (prior +97 bcf) at 10:30 ET
- Friday: May Industrial Production (prior 1.1%) and Capacity Utilization (prior 79.0%) at 9:15 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!