Market Wrap – Selling in Stock Markets Accelerate as Crypto Collapses June 13, 2022

The markets continued on from Friday’s wreckage flinging the Dow, Nasdaq, and S&P 500 to new 52-week lows and the S&P 500 back into bear market territory. What amazes us here is how was this a surprise, we warned of the Dribbler trap aka Bear market rally, we all knew CPI ahead, we had all the bank warnings, we knew FOMC on deck. We could go on and on, but human nature gets greedy and the dribblers if nothing else are great story tellers. Then boom fear hits the deck.

The Treasury market got smacked as did the Yen and Crypto on rate-hike concerns and growth concerns. The 10-yr note yield settled its session up two basis points at 3.04%, but the 2-yr note yield jumped five basis points to 2.82% and hit its highest level since late-2018. Bitcoin was down 15.5% to $23,212.40 while Ethereum was down 17.2% to $1228.22, the safe haven theory looking a little wobbly.

Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share

Live on YouTube

This week we have inflation data and more Central Bank action as a result yields, energy prices and the 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.


Market Closes

Energy

  • 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 increased past its May high, rising 0.8% to 105.03.
  • Euro reversed after today’s ECB rallying first and then declining 90 pips below the May 31 low to the worst levels in two weeks.  EUR/USD was down 0.9% to 1.0614.
  • Gold futures settled $43.70 lower (-2.3%) to $1,831.80/oz, a more than three-week low as yield and dollar gains applied pressure.
  • Silver Futures 21.075 -0.856 -3.90%
  • Natural Gas Futures 8.688 -0.162 -1.83%
  • Unleaded Gasoline Futures 4.0077 -0.1645 -3.94%
  • Copper Futures 4.1985 -0.0960 -2.24%
  • Corn Futures 766.00 -7.25 -0.94%
  • Wheat Futures 1067.75 -3.00 -0.28%
  • Bloomberg Commodity Index 133.24 -2.19 -1.62%
  • Bitcoin 23260 -4124 -15.06%
  • Ethereum 1244.30 -233.67 -15.81%
  • Ripple 0.3207 -0.0331 -9.35%

Stocks

US Indices & S&P 500 sector watch:

  • Dow industrial average 30,518.06 -874.73 -2.79%
  • S&P index 3,749.91 -150.95 -3.87%, down 21.8% from the record on January 4.  S&P 500 has now completely erased the 2021 gain.
  • NASDAQ index 10,809.23 -530.80 -4.68%- lowest close since November 2020
  • Russell 2000 1714.59 -85.69 -4.76%
  • NYSE Composite 14527.90 -568.79 -3.77%
  • CBOE Volatility 34.02 6.27 22.59%
  • NYSE Adv 182 Dec 3166 Vol 1.2 bln
  • Nasdaq Adv 583 Dec 4238 Vol 5.8 bln
  • Declining issues outpaced advancing issues by a 16-to-1 margin at the NYSE (that spread was 23-to-1 shortly after the open) and by a 7-to-1 margin at the Nasdaq (that spread was 11-to-1 shortly after the open).
  • All 11 S&P 500 sectors closed down from 2.16% (consumer staples) to 5.22% (energy). Nine of the 11 sectors fell at least 3.0%.
  • The Vanguard Mega-Cap Growth ETF (MGK) dropped 4.5%
  • Invesco S&P 500 Equal Weight ETF (RSP) fell 4.0%.
  • Russell 3000 Growth Index declined 4.5%
  • Russell 3000 Value Index declined 3.8%.
  • Eight of the 11 sectors declined at least 2.3%.

Market Pre-Market Notables

  • Tesla (TSLA 665.48, -31.21, -4.5%): Files for 3-for-1 stock split; RBC Capital Markets upgrades to Outperform from Sector Perform
  • Carnival Corp (CCL 10.58, -0.47, -4.3%): Wall Street Journal says cruise companies are lowering prices to fill boats with increase capacity limits for summer cruising
  • Choice Hotels (CHH 126.32, +6.01, +5.0%): to acquire Radisson Hotel Group for $675 million

US Markets YTD

  • Dow Jones Industrial Average: -16.4% YTD
  • S&P 400: -19.3% YTD
  • S&P 500: -21.3%
  • Russell 2000: -23.6% YTD
  • Nasdaq Composite: -30.9%

Key After Hours


  • ORCL earnings: ADJ EPS $1.54, est: $1.38 ADJ revenue: $11.84B, est: $11.66B ORCL AH +2.36 +3.41 at 69.50

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

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 began the week on a sharply lower note. The 2s10s spread ended the day at ten basis points, six basis points tighter since Friday’s settlement. Expectations for a 75-bps hike on Wednesday continued growing with the implied likelihood increasing to 31.3% from 21.3% on Friday. iShares iBoxx High Yield Corporate Bond ETF (HYG 73.33, -2.30, -3.0%) and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD 107.95, -2.58, -2.3%) hitting their lowest levels since late March 2020.

  • 2-yr: +23 bps to 3.27%
  • 3-yr: +24 bps to 3.45%
  • 5-yr: +23 bps to 3.48%
  • 10-yr: +21 bps to 3.37%
  • 30-yr: +17 bps to 3.37%

USA News

  • MS CEO Gorman says: No one can accurately predict where inflation will be a year from now
  • Chances of a recession are 50-50 now
  • European economy is going to be slower than the North American region this year for sure
  • He still does not see a deeper longer recession

Europe

Europe Stocks

Index – Last – Chg – % Chg

  • German DAX, -247.19 points or -1.71% at 14198.81
  • France’s CAC -90.17 points or -1.4% at 6358.47
  • UK’s FTSE 100 -116.81 points or -1.54% at 7476.20
  • Spain’s Ibex, -131.5 points or -1.49% at 8711.21
  • Italy’s FTSE MIB -122 points or -1.75% at 23813

Europe News

  • Ukraine agriculture minister says that Ukraine has lost 25% of its arable land due to the war.
  • Ukraine is a major producer of wheat, sunflower seed oil, cereals, and other agricultural products. Ukraine was the fifth largest grain producer in 2020 and together with Russia make up around a quarter of global wheat production.
  • Fitch affirmed the U.K.’s AA- rating with a Stable outlook.
  • Reuters reported that the Bank of England will raise its bank rate by 25 bps on Thursday and maintain a slow hiking pace in the coming months while FT speculated that the BoE will hike by 50 bps this week.
  • French President Macron’s party may lose its parliamentary majority after an underwhelming showing in yesterday’s election. The second round of voting will take place on June 19.
  • U.K.’s April GDP contracted 0.3% m/m (expected 0.1%; last -0.1%) but was up 3.4% yr/yr (expected 3.9%; last 6.4%).
  • France’s Q1 nonfarm payrolls rose 0.3% qtr/qtr (last 0.3%).

Asia

Asia Stocks

Index – Last – Chg – % Chg

  • Japan’s Nikkei: UNCH
  • Hong Kong’s Hang Seng: -0.7%
  • China’s Shanghai Composite: -0.8%
  • India’s Sensex: +0.8%South Korea’s Kospi: UNCH
  • Australia’s ASX All Ordinaries: -1.5%

Asia News

  • South Korean truckers remained on strike for the seventh day in a row.
  • South Korea’s exports through the first ten days of June were down 12.7% yr/yr while chip exports increased 0.8% yr/yr.
  • Bank of Japan Governor Kuroda repeated that the BoJ will continue its ultra-loose policy
  • Japan’s Q2 BSI Large Manufacturing Conditions fell to -9.9 from -7.6.

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.

Looking ahead:

Economic Data:

  • 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

Earnings:

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!